The 2 Key Elements For Financial Freedom


Achieving financial freedom isn’t easy and
it does require a lot of work, but there’s actually just two key elements that are required
to achieve financial freedom. So in this episode I want to talk about what
those two key elements are, give you this framework, and so then you can go about creating
financial freedom in your own life. One step at a time. Hey, I’m Ryan from on-property dot com dot
EU. I hope people invest in property and achieve
financial freedom. And when it comes to achieving financial freedom,
there’s two key things that you need. One of them is assets, and I’m going to use
Robert Kiyosaki’s definition of an asset here rather than the financial definition. And so an asset is something that generates
passive income and puts money into your pocket. So you’re going to need as many assets as
possible and you’re going to need as little liabilities as possible. And so liabilities are things that take money
out of your pocket. So basically the opposite of passive income. So if you have a loan to pay interest on that,
that’s a liability. If you have a house, even if you own that
house outright, you’ve got to pay rates, you’ve got to pay insurance, you’ve got to pay water
for that house, so they are liabilities, their expenses in your life that you need to pay
for. And so the two key elements for financial
freedom is as many assets as possible and as few liabilities as possible. And to achieve financial freedom, you just
need more income coming in from the assets than you have going out from the liabilities. And that’s how you flip the scale into financial
freedom. So there’s two ways you can do that. Obviously you can decrease your liabilities
so you don’t need as much passive income coming in, or you can increase your passive income
or you can go ahead and do both. So the key element here is that you’re going
to need to create some passive income in your life to achieve financial freedom. So a lot of people go after, after just owning
their own home, owning their own home outright, which I think is a really great goal. But let’s have a look at that from the asset
standpoint. And the passive income standpoint, well, owning
your own home and owning an outright can be great for reducing your liability. So if you need to pay rent or if you need
to pay a mortgage, then that’s some serious expense that you need to pay each and every
week or each and every month in order to live in that property. If you can own a house and own it outright,
you’re taking away rent, you’re taking away mortgage, and so even though you still need
to pay rates, insurance, etc, that’s going to be significantly lower than someone who’s
paying your mortgage or someone who’s renting. So by owning your own house, you’re reducing
your liabilities, which is a good thing, but if you don’t have any passive income, it’s
never going to create financial freedom. So really there’s only one key element to
creating financial freedom, and that’s assets that deliver you financial freedom. Reducing your liabilities is good because
it means it’s easier to achieve financial freedom. You don’t need as much passive income from
your assets, but really you only need that one key element, which is the assets that
deliver you financial freedom. Now these assets can come in many different
forms. It could be in shares and dividends that those
shares pay out. It could be through investing in property
and the rental income from those properties. It could be investing in cash and then making
a return in cash, though with current interest rates as well as inflation, the chances of
you achieving financial freedom and enough passive income through savings alone is extremely,
extremely small, so you can invest in a lot of things. It could be a business that just runs without
you, which is how I achieved my financial freedom. I have online businesses that run without
me needing to touch them every single day. So that’s how I achieved my financial freedom. So let’s have a look at building these assets
because there’s two ways you can do it. One way is you can purchase that asset, and
the second way is that you can go ahead and actually create that asset from scratch. Now that is harder. It makes a lot more sense for people to go
ahead and purchase assets. So you might work in a job and you go to work. You work everyday, you earn money, you spend
less than what you earn, you save up some money and use that money to purchase assets
that will generate income. Canna Campbell from the thousand dollar project,
she’s written a book called the thousand dollar project, which I absolutely love. I’ll leave the links to that in the description
down below. She saves up these chunks of a thousand dollars
and then she invest them into shares that will deliver her dividends, so that’s a way
that she takes money and she purchases assets that deliver her passive income. The same could be said for investing in property. You take savings in the form of a deposit. You also borrow money from the bank, so you’re
using other people’s money and you then go out and you purchase this asset being an investment
property. Now like with the classification of assets,
if that property was positive cashflow, I would classify that as an asset. If that property is negatively geared, even
if it’s going up in value, I would classify that as a liability because it’s actually
taking money out of your pocket and not helping you. Well, it could be helping you move towards
financial freedom, but at that exact point in time, it’s keeping you from financial freedom. So I think probably is that generate positive
cash flow or an asset. That’s the way I look at it. Obviously you want capital growth as well
and so we’re kind of stepping outside the definitions that we’re talking about today,
but yeah, the idea here is that you can take money and then you could invest it in shares,
you could invest it in property, you can invest it in businesses, you could invest it in. There’s a whole bunch of different other things
that you could invest in in order to get that passive income coming in. So that’s one way to do it and that might
be the best way for a bunch of people out there. I spoke to a guy, young guy recently, Jonathan,
who has been working really long hours, like I think you were saying 50 or 60 hours a week
and he’s been saving and uses his savings to purchase properties and generate his passive
income that way. So that’s the way that a lot of people do
it. That’s one way that you could do it. I really do like the thousand dollar project
idea and so please go to today’s show notes. If you’re listening to the podcast at on-property
dot com dot EU for session 5:40, and I’m going to link to link to that book there. So go ahead and purchase that book. But the idea in the thousand dollar project
is great for people out there who are employees, even if you run your own business, but just
this idea of saving these chunks of a thousand dollars and using them to purchase at investments
that’s been off passive income, absolutely loved that idea. So that’s one way that you can do it. The other way is the way that I did it, which
is you create your passive income from scratch and generally that’s going to be in the form
of businesses. You can’t actually do it through creating
partnerships and you could be investing in property with none of your own money by doing
joint ventures, et cetera. But for me, I did it through creating my own
businesses and I know that a lot of people out there had done this as well. You could do it online, you could do it offline
and have people manage your businesses for you. But yeah, you can create things from scratch. Technically it’s probably not exactly from
scratch because you know, you need money to purchase a domain name, build a website or
purchase gear to film with to create youtube videos. But there’s lots of opportunities out there
where you can put in sweat equity so you can put in your time and you can create an asset
that spins off extra money. So for me, I’ve got niche websites that I
have created, like I’ve got one that I made maybe eight years ago that makes it a little
bit of money each month. Not Heaps, but I literally don’t think I’ve
touched that or made new content for that in the last four or five years and it still
makes money every single month. So that’s really something that I haven’t
touched in a long time, but continues to spin off income. So I created that from scratch, I created
all the content for that website. I took a risk on that in order to spend my
time and my effort creating that, not knowing if it’s going to generate a return that one
did. I’ve got a whole bunch of other websites that
have been complete failures where I’ve taken the same amount of time and effort, maybe
even more time and effort put into these websites that then created nothing. So obviously if you’re creating an asset from
scratch, it’s going to be a lot more difficult. There’s more risk involved, but if you’re
just investing your time, you can really build up some great assets. There’s another website that I have where
I recommend, or maybe it’s a youtube channel that I have actually where I talk about some
of the online services that are used to run my own business. I reviewed them and stuff like that. I created that maybe one or two years ago
did some videos for that. Referred people to an email marketing service
that I use and there’s people who sign up for that and each month that they pay for
that service, I get a commission for that. So even though that website is not doing as
much traffic or sales anymore, sales that I got one or two years ago are still delivering
me passive income today. So there’s so many different ways that you
can create an asset and you can create that passive income. I think we get skewed because so often we’re
thinking about the big numbers and the capital growth around property and a million dollars
in equity or $5,000,000 in equity or owning 10 properties that we forget about the idea
that really if financial freedoms, your goal, the passive income is what you care about,
not the equity. And so for me, I’ve got these websites or
I’ve got these youtube channels or I’ve got these businesses that spin off passive income,
but truthfully they’re probably not worth a lot of money in terms of equity. So or try and sell that business. I couldn’t get a lot for it, so I have very
little equity in those businesses, but for me, what’s important is the passive income
and so I’ve been able to create that passive income and then get financial freedom that
way and there’s lots of different ways to do that. But yeah, I guess I just wanted to give you
guys a framework today to say if you want to achieve financial freedom, sure you can
do it through investing in property and generate passive income that way, but just to have
this idea that by reducing your liabilities, by increasing your assets and assets, not
being equity, not being things of value, but assets being income generating assets, so
things that generate passive income without you needing to do anything. Building up that passive income side while
reducing your liabilities, that’s going to give you the framework you need to go ahead
and start to move towards financial freedom. And for me, it didn’t happen all at once. Where I was, you know, click my fingers and
I’m financially free, but I would build up these little revenue streams one at a time
and then eventually they build to quite a sizable amount where if you’re working a job
as well, you’ve got these extra things that are making money you can reinvest to create
them or create more of them or you can take the money that they’re spinning off to purchase
assets like purchasing shares or purchasing property. So there’s many different ways to do this. It’s really up to you how you do it and where
you feel your strengths lie. But yeah, just wanted to share this concept
today of looking in your life at ways you can either purchase assets that generate passive
income or ways that you can create them yourself as well as looking at ways to reduce your
liability. So I recently did a video on why we’re getting
rid of our credit card because that’s a liability in our life that we would need a significant
amount of money to offset that liability. So just by getting rid of that liability,
I now don’t need as much income coming in in order to be financially free. And so that’s a really cool video. Go ahead and check that out. Why I’m getting rid of my credit card and
don’t forget to subscribe to the channel because we’ve got new episodes coming out every single
week. Day. That’s it. Different me today guys. And until next time, stay positive.

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