Philosophy Tristan on 11 Feb 2009 02:50 pm
Safe Strategies For Financial Freedom
Here’s the thing, there is no safe way of achieving financial freedom, every path that you can choose will always have some element of risk. Let’s take for example, the traditional route to financial freedom, the deferred life option, chosen by many baby boomers, many of whom are now retiring, after having worked for 40 years they have achieved a nice retirement income and a house without a mortgage.
You may argue that this path doesn’t sound risky, but I would beg to differ. In the modern economy, the chances of finding a safe secure job are pretty slim these days. So although the plan of working for 40 years and slowly paying off your mortgage and building up a decent retirement income will still work, there will be times of immense stress while you are unemployed (through redundancy). There is also the risk that you may not live to see your autumn years, and all that hard work will have been for nothing.
So what about a riskier strategy? Being your own boss will always be beneficial, though it does come with risks, just like having a job does. The real trick is to find ways to manage and mitigate the risks of being self-employed or running your own business. When you have a job, pretty much everything is taken care for you, all you have to worry about is doing your job. When you own your own job (self-employment) or run a business (provide jobs for others), you have to worry about everything, so it can be more stressful and risky, if you don’t find strategies to manage the risk and reduce the stress.
The safe strategy for finding financial freedom is to pick how you want to earn your money, be through a job, self employment or from running a business, then make sure that you work hard to keep your personal expenses low, and acquire assets that will provide passive income. The sooner you start doing this the better, even if they only provide £50 a month initially, once you have a few of these assets, you will have developed a passive income that will be of some use. Granted, you may need 20 just to generate £1000 a month passive income, but once you have that coming in, and assuming you’ve followed the advice about living frugally, you should be in a situation whereby should you lose your earned income, you will still be able to get by on your passive income.
But don’t stop acquiring assets, just keep on doing this over and over again whilst keeping your living expenses to a minimum. In time, you may get to the stage where you have more than enough income to live off from your passive income alone. It is at this stage that you will have achieved financial freedom, and it will have been achieved through a relatively safe strategy, however, as I said at the start, any strategy carries with it some risk.
