Saturday, October 10, 2009

Thoughts on Financial Freedom -- 2

On Expenditure

If financial freedom really financial freedom if you have to scrimp and scrimp so that you spend less than you earn from passive income? I wouldn't think so.

I mean, all the talks about "it's about spending less than what you earn"... are too generic and doesn't contain sufficient information. It's just like a person who is dieting by eating less and less till he/she reaches his/her normal weight. Works? Definitely for the short term, but in the long run, it will result in a disastrous yo-yo diet syndrome where he/she will just get fatter and fatter.

The best way to get a healthier body fat ratio (or whatever) is a change in lifestyle, i.e. your choice of food, your planning of time for exercises, sleep, etc. Similarly, the best way to financial freedom is a change in lifestyle in spending habits, in choice of activities you do, choice of income sources, planning of cash flows and movements, etc. In both cases, nothing can be achieved overnight; having a clear goal in mind with meticulous planning and discipline is of paramount importance. And, you have to be happy with your lifestyle, and not be complaining everyday it's so tough to maintain your low expenditure lifestyle, but you have achieved financial freedom.

For example, my average monthly dividends is about $450. If my expenditure is <$450 monthly, I could claim I have achieved financial freedom! But what would my lifestyle be? $100 for instant noodles every meal for the month? Zero recreational activities, zero fan, zero air-con, no need for housing, etc... You get my drift...

Financial freedom is about having the choice to do what you like normally with little or no worries about money.

Of course, I'm not talking about financial abundance, where you could have your dream lifestyle with no worries about money. It's more about maintaining your current lifestyle with no worries, i.e. the food you eat, the recreational activities you do, the way you travel, etc.

Financial freedom is a way of life.

Just like a life of keeping fit and healthy is a way of life, financial freedom is about your way of life too. It's about your habits, the things you do, the way you see and analyse events, that shape your financial health.

In the world of bodybuilding, we say you are what you eat. So if you eat junk food, you will look like junk. Bring that to our financial status; you are what you do. A good plan and goal will result eventually in good financial health.

Financial freedom is a mindset.

You could be earning $100k in passive income a year, yet you are still not in financial freedom. Doesn't this reek of anorexic people who keep telling everyone they are still too fat? It's about how you see yourself, how you see your financial health. There's no point comparing with others. The most important thing in life is to be optimistic, and satisfied with what was given to us, be it intellectually or financially. Afterall, after another 100 years, all will be gone from us right? We will just be another dust below the soil.

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