What is Financial Freedom?

What is Financial Freedom to YOU? Financial freedom means different things to different people. Some people consider financial freedom to mean 100% debt free. Other people consider financial freedom as having enough money saved in the bank to live off, but how much is enough? How long are we going to live for and what is the quality of life we would like to maintain? So again I ask, what is financial freedom?

I think the best definition of financial freedom that I have come across is the one Robert Kiyosaki uses in his book Rich Dad Poor Dad. He says a person is financially free when his/her residual and/or passive income exceeds expenses.

Residual Income: "Recurring payments that you receive long after the initial sale is made, usually in specific amounts and at regular intervals." Example of this would be a songwriters or authors who continues to receive royalties from the sales of a piece of work created once or salesmen who continue to receive monthly commissions from onetime sales. Passive Income: "Income derived from business investments in which the individual is not actively involved." Examples of this type of income would be dividends received from shares owned or monthly income from a rental property or even interest earned on money sitting in the bank.

Let's use Bob, a made up character to see exactly what I mean, and let's see if we can help Bob discover what financial freedom is.

Bob currently lives in a three bedroom house and he drives a 4 year old BMW. He has a lovely wife and 2 children both still in school. All of Bob's expenses; the house payments, car payments, school fees, food etc. come to around £2000 per month.

If Bob wishes to become financially free and maintain the same quality of life that he enjoys today then he needs to increase his residual and passive income to be equal to or greater than £2000 per month. Now Bob is financially free and if he chooses so, he never has to work again, he knows that month after month after month he will be making enough money to cover his expenses for work he has done once.

If however Bob wishes to increase his quality of life and buy that boat he has always had his eye on, or that brand new car, or even that 5 bedroom house and still be financially free, then he needs to increase his Residual and Passive income to cover his new expenses.

Everybody deserves financial freedom, you, me, our neighbours, everyone.

The other day I was listening to an audio tape by Randy Gage and he was talking about the rat race and everyone in it. He talked about the average person's week:

Monday - Eeerrrrr... the alarm wakes you up, you get up, get dressed, eat, spend an hour commuting to the office, work 'til lunch, have lunch, you work 'til 5 'o clock, spend an hour commuting back home, you get home, cook dinner, watch TV and then go to bed shattered from an exhausting day's work.

Tuesday - Eeerrrrr... the alarm wakes you up, you get up, get dressed, eat, spend an hour commuting to the office, work 'til lunch, have lunch, you work 'til 5 'o clock, spend an hour commuting back home, you get home, cook dinner, watch TV and then go to bed shattered from an exhausting day's work.

Wednesday - The same thing.

Thursday - The same thing.

Friday - The same thing except maybe instead of TV its drinks with some friends or a night out to wind down from the week.

He made a comment that really struck home and it is so true when you think about it. He asks if you know what time a person is supposed to wake up. "What time are you meant to wake up?" The answer: When you have finished sleeping! Not when an alarm sounds...

Surely life is not supposed to be about working a JOB? This cannot be what we were put on this earth to do? This world is huge, there is so much to see and do, so many places to travel to, and so many people to meet. Why do we let work get in the way of experiencing all that life has to offer?

That is what financial freedom is all about and that is why everybody deserves to be financially free.

"Freedom is not merely the opportunity to do as one pleases; neither is it merely the opportunity to choose between set alternatives. Freedom is, first of all, the chance to formulate the available choices, to argue over them -- and then, the opportunity to choose." - C. Wright Mills