People strive to be rich and wealthy, but what might be more important is financial freedom. To me, financial freedom means being able to do whatever you want, whenever you want. I haven’t quite reached financial freedom yet, mostly because I have some very expensive tastes like exotic cars. Financial freedom means something different to everyone because everyone has different expenses, hobbies, responsibilities, and desires. To achieve financial freedom, you must know how much money you need every month to live the way you want to live. It could be $5,000, $20,000, or $100,000 depending on what you want to do in life. Once you know your number, you have to figure out how to achieve that number! I personally love real estate for creating recurring income, but there are many other ways to do it as well.
Why is financial freedom more important than how much money you make?
Most people want to be rich, but many people do not know what being rich means. There are some who make hundreds of thousands of dollars per year but have very little to show for it. They spend all their money, don’t invest it, and hope they continue to make a lot of money for the rest of their lives. If they stop working, they will probably go bankrupt. That does not sound like a good plan to me. A good plan would be creating passive income that covers your expenses whether you work or not. That is one of the great things about rental properties. My rentals are all managed by property managers, so I do not have to work on them. I have about $9,000 per month coming in from my rentals after all expenses and mortgage payments. I make a decent amount of money from my house flipping business, but if I can’t work, I still have my rental property money coming in every month. I also have money coming in every month from this blog and my book sales on Amazon. If I stopped working today, I would have about $20,000 per month coming in. I would definitely survive, but I have high aspirations in life.
Other people may be perfectly happy with $5,000 per month in passive income because the things they love in life are not nearly as expensive as the things I love. That is the cool thing about life: we are all different and can be happy in different ways. Someone who makes $50,000 per year with passive income can be much more secure than someone who makes $300,000 per year with no passive income.
How do you figure out what your financial freedom number is?
My financial freedom number is very high. I love houses; I love cars; I love vacations; and those are all very expensive. When I was younger, I used to tell myself I did not need any of those things. I told myself I would be happy living a normal life without any great expectations. Mostly, I was lying to myself because I did not believe I would ever have those things. If I lied and told myself I didn’t really want those things, then I would not feel as bad for not having them, right? It turns out life is much more fun; I became much more successful; and I was much happier when I stopped lying to myself. I started making goals, one of which was to buy a Lamborghini, and I started to achieve them. Having high aspirations caused me to have more and more success and motivation. I can tell you that if you hide your true passions because they are expensive, you are most likely never going to achieve them. I would much rather try for the things I love and not get them than to never try and wonder what would have happened if I did try.
It is up to you how you want to figure your financial freedom number. I think it is best to set high goals so you do not cut yourself short. If you don’t reach those goals, that is fine. You are still much better off than you would have been with no goals or easy-to-reach goals. Here are some things to consider when figuring your number:
- What kind of cars do you want and what will their expenses be? Initial cost, Insurance, payments, maintenance?
- What kind of house or houses do you want and what will their expenses be?
- What are your living expenses for food, health insurance, clothes, entertainment, education, etc?
- What are your expenses for your children?
- What are your travel expenses?
- What are your favorite hobbies, and what do they cost?
- Do you have other dreams and goals like paying for your children’s college, giving to charity, or moving to the beach?
This number may be pretty high when you add everything up, but that is okay. I also may have forgotten a few expenses, so make sure you really think about everything you will need to pay for or are paying for now. Once you have a number in mind, it will make it much easier to achieve, even if it is high.
How do you create financial freedom with real estate?
Once you have your financial freedom number, you can work towards creating passive income. This may seem like the hard part, but most people never come up with their number. Once you have your number, it makes it much easier to create the passive income. Make sure you take the time to create your number!
I won’t go into the details in this article on how to create financial freedom because this post would be 30 pages long. However, I do have many other resources on my site for creating passive income and some ideas that I will share.
- Rental properties (my favorite). I flip houses and run a team of agents to create income. I use that income to buy rental properties, which create passive income. You can learn more about rentals here.
- Stock market. You can create passive income with the stock market, investing in stocks that pay dividends. I am not an expert on the stock market, and I have no issue telling you why I like real estate better.
- Bonds, CDs, Money Markets. I am not a fan of these because of the low interest rates they pay. It takes a lot of money to create a decent amount of passive income with these investments.
- Being a lender. It is possible to be the bank with real estate as well. I borrow money for my flips from private investors all the time. You can also buy loans from banks.
- Starting a business. Not only can you invest to create passive income, but you can create a business. The best businesses run by themselves without the owner working.
- Write a book. If you write a book that does well, it can create passive income for years.
- There are thousands of other ways to create passive income.
The really cool thing about creating passive income is it lasts for a really long time, whether you work or not. The royalties from books may not come in forever, but the rent from an investment property will if you don’t sell the property. When you create passive income, it is very satisfying because you know you put your money or time to good use. When I first started making great money as a real estate agent, I felt anxiety because I did not have as much to show for that income as I thought I should. When I started buying rentals, I had something incredible to show for all the hard work.
Creating financial freedom is something we should all strive for. Not only is it awesome to be able to do whatever you want whenever you want, but it is safer. If you get sick, or something worse happens and you cannot work, how will you pay the bills? Another thing financial freedom and passive income can do is allow you to take more risks. I am willing to flip up to 22 houses at a time, and pursue other business ventures because I know I have that passive income as a safety net. If there is a business you want to start or you have great things you want to accomplish that are risky, having passive income behind you can make it easier to take the leap.