Steps to Financial Freedom
Why should we start saving now? How much to save? Why saving alone is not enough to achieve financial freedom? How Inflation eat into our saving? How to beat Inflation? The meaning of different type of income such as active income and passive income. How financial education leads to financial freedom. The 7 steps to financial freedom.
Steps to be Financial Freedom
Saving is the first step for wealth creation. It is especially important now due to current uncertainty of world economies and massive job loss all around the global. It is the best time now to revisit the important habit of saving. Many corporation and individual are lacking or with little self discipline on saving. Some individual have bad habit to save money on the residual balance left after they have spent most of their pay check. The money left behind for saving will be minimal. The right habit is to set aside of 10% on monthly pay check for saving, then uses the rest of the money on necessary expenses.
It is recommended that we set aside at least 3 to 6 months of our current salary as our sinking fund. On unforeseen circumstances, we can draw money from the sinking fund. The purpose is to safeguard us against some undesirable events that happen to us with little control over the events. This included job loss, long term illness and etc. These events may result in loss of income over short or longer term. This will bring negative effect to us as well as our dependents in term of daily expenses and financial commitment.
However, saving alone is not enough to secure us with a good retirement or financial free. Saving interest put in a Singapore bank is currently less than 1% as compare to inflation as high as 3% in Singapore. Inflation measures price increase of general goods over the time in % term. This means that every year, value of your money going to be drop by 2%. Over 10 years, the value of your saving going to drop by 20%! On the other hand, due to increase of world population, higher demand for goods leads to higher goods price. You can beat that 100% increase or more in property price in ten years' time!
Therefore, we need to invest in financial education starting from today if we are serious want to be financially free! We need to make our money work harder for us. We need to control and reduce our expenses at the same time.
We need to acquire passive income other than our active income. Active income includes our salary, bonus, commission and etc in which we must actively involve to earn them. This is usually base on the number of hours we work.
Our active income is capped by the number of hours we work. We only have 24 hours per day and not forgetting to deduct hours set aside for our family, friends and recreation activity.
Passive income on the other hand, we do not need to active involved to earn that income which are dividend, interest income and rental income. The best thing about passive income is not restricted by number of hours we work! Financial education can be learned by reading financial books, attend financial seminars or training. We can also learn from successful people, they can teach you know-how techniques to achieve your financial goal.
Please visit the following website to find out more about the 7 steps to financial freedom!
Author by Nelson Chen.
Please visit http://www.newbornmillionaire.com/ for more information.
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ABOUT THE AUTHOR
Nelson & Co. http://www.newbornmillionaire.com/