What is Financial Freedom? Episode 3: Sustainability

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3 years ago

3 September 2021, Somewhere in the Metaverse - UplandDood (@Just1Dood)

Written on 3 August 2021

As with Episode 1 and 2, I'll start with some disclaimers:

"Not Financial Advice. Do your own research. All thoughts are my own. Did not run through any checkers. Definitions if any, are respectively owned by the definers and attributed as such."

In the last two episodes, I'd talked about Passive Income and Residual Income and what they are. You can check out Episode 1 and Episode 2 if you haven't already. Though I'm not a financial planner and am not giving financial advice, I do think that what I have to share is important and that if you read them, it should get you thinking about your own financial habits. I do hope that in the long run, you will be a better steward because you have spent more time doing your own research and planning because you have read these articles.

The first two Episodes are foundational otherwise this next point is err...pointless towards anyone's financial freedom goal.

Let's continue with Episode 3 then.

Financial Sustainability

This is the motherlode. Yes, it is, in a sense. If it's not sustainable then don't even dream about achieving financial freedom.

Scouring the cyberspace, I've found that most definition relating to this world is mostly about the environment. This is surprising for me because if as an individual, we do not know what a roadmap to self-sustainability looks like, then we might as well forget about the bigger picture of the environment.

The best definition I can think of that fits in the series is by an organization named humentum. I've found this definition on their humentum.org website:

An organisation is financially sustainable if its core work will not collapse, even if external donor funding is withdrawn.

Let me put it another way.

An individual is financially sustainable if living his/her life is not impacted, even if his/her ACTIVE income is halted.

What this means is that his/her PASSIVE income is generating enough to sustain him/her. But that's not all. Read on to find out.

If you're not given enough oxygen to last a lifetime, then you are screwed. Get it? You want a lifetime's supply. A lifetime's supply is only possible through passive income.

What do I mean by sustainable?

Again, let me paint the picture for you.

Let's use the same example mentioned in Episode 2. We are assuming you have just paid off all the loans. And we further assume that after deducting your daily and miscellaneous expenses, you still have $1000 left. This is the residual income from your passive income.

You are far from financially free yet. Here's why.

God forbid, let's say that all of a sudden your house roof leaks and needs repairs, and in the same month, your car windshield was damaged and needed to be replaced. Total for both emergencies totaled $1500.

And you don't have any savings in your bank. Instead of having $1000 extra from your passive income, you are now $500 in the red.

How then do we become self-sustainable that we can be considered financially free?

Here are some points for further consideration.

  • Do you have enough saved up in your account to last a certain number of months if for some reason your passive income suddenly stops? E.g. 6 months, 1 year, 2 years, or 3 years? You have to determine how long that period is for you to be comfortable. Obviously the longer the period the better. The pandemics have shown us that the normal 6 months extra is not enough.

  • Is your residual income utilized to further generate an income for you?

  • Are you able to utilize your free time to generate other sources of passive income? Is this source dependable on to generate an income for your lifespan?

I'm sure there are many other factors to be considered but the above should be enough to get us thinking about our current situation.

Ideally, to be self-sustainable, we need to have an income that is continual, expenses that are below this amount (i.e. for the most part, living below our means), and enough in reserves to ride through any storms.

For some, it is a good idea to get advice from a certified financial planner. For others, it's a matter of taking time to take stock and know your position and plan accordingly.

We have heard of many stories of Rags-to-Riches. Rags-to-Richest stories are usually full of success principles. But what we don't hear about are the Riches-to-Rags stories. There are probably more of such untold stories and these are the stories that will sober us up. Ironically, Rags-to-Riches will cause us to dream and the other will wake us up.

What is Financial Freedom?

As we can observe from the simple examples in Episodes 2 and 3, it starts with getting rid of debts. I'd mentioned in Episode 2 that the biggest investment one can put their money in is in their own debts. Paying off credit card debts with an 18% or more interest rate is better than keeping that same amount in the bank earning less than 5% at best. DO NOT LET THE BANK TAKE YOUR MONEY through credit card interests.

Next is accumulating wealth. Take advantage of the compounding principles to increase your wealth faster. Never fall for shortcuts. There is no such thing as a free lunch. As mentioned in Episode 1, there is always a cost. A trade-off between time for money and money for time. The younger one starts, the better it is. But, it is never too late to start.

In closing, Financial Freedom is simply the resources enough to sustain your living needs until the day you leave earth.

Thank you for reading. I hope you have enjoyed this extended 3 episodes series. As you'll see again in the disclaimer below but I do hope this will get you started on building your way towards a financially free life!

[This is not financial advice. It is the writer's personal viewpoint. Please do your own research.]

Towards a #BetterSeptember!

Header: Unsplash.com - Sabrinna Ringquist

All Rights Reserved ©2021 UplandDood | #ClubBrokeBCH

Thank you again for dropping by. Have fun with English. Remember to share your experience in the comment section.

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3 years ago

Comments

For me, this point of sustainability is the hardest to achieve in the pursuit of financial freedom. Many times we believe that we are doing well, and suddenly unforeseen events change our reality from one moment to the next. Meanwhile, we keep working on the previous episodes. ;)

$ 0.03
3 years ago

This is tough. I agree. Emergencies do happen and will eat up our 'golden nest' and may even deplete it. It is also a reason why I envy the younger generations who has this knowledge. The opportunities available today, if made use of correctly can help one built his/her net worth much faster than in the past.

$ 0.03
3 years ago

I agree with you. The new generations have access to such information that can provide them the knowledge to build a better financial position. When I was young, my parents instilled in me the idea that studies and a good job were the paths to success.

And today, we know that isn't true. For me, it's still important to get a good education. But in my country, even being a professional, the work is so poorly paid. Nowadays, it's impossible for young people to go only down that path

$ 0.03
3 years ago

studies and a good job were the paths to success.

Right. Though this is still an option, it is no longer the best.

$ 0.01
3 years ago

In this trying time, financial freedom is far from reality but im not saying its not doable, it is but will really be a struggle..

$ 0.03
3 years ago

It is not easy and the sad reality is that many will not attain it. BUT, I believe that those who plan well will fare MUCH better than those who do not.

$ 0.00
3 years ago

And I don't have financial freedom yet.. Well maybe if I am living by myself. But since I'm considering other people, my resources aren't enough 😅

$ 0.03
3 years ago

It is a slow and carefully planned journey. I think you're doing well with your current crypto investments! How I wish I have that kind of discipline to do the farming that you do.

$ 0.00
3 years ago

I've always said to friends that financial education should be taught early on in school. Here, we were only taught to save. Put something in your piggy bank or open a savings account. That's it. We should explore more. Start them young.

It's only recently that I have started to think about my finances and I feel it's too late, that I'm running out of time. It's frustrating. If I lose my job now, then I can't sustain myself. But I'm learning. Little by little.

$ 0.03
3 years ago

You are absolutely right. Financial wisdom should be taught at a young age. Just saving is NOT good enough. Just like the same brainwashing we all go through generations after generations...study hard....work hard...HUH? Says who? Never too late to start thinking now. You can still achieve your dream. All the best, friend.

$ 0.01
3 years ago

That's right. I hope this will help others especially the young ones here for there are a lot of them to be more financially educated.

$ 0.01
3 years ago

I do hope so. I mean I'm not a financial advisor and those are not financial advice but I do hope it gets everyone (my included) to plan for a better financial future. Always an advantage to start earlier than later.

$ 0.00
3 years ago

Sustainability is the mother of all income types. If I can't be able to close my eyes a minute and say that even if I don't work for the next 6 months, I will still be taking care if things like normal, then the income type is not sustainable which calls for change or an upgrade to something better.

$ 0.03
3 years ago

Exactly! This pandemic has taught us that our reserves should last one to two years at the minimum with our Active income reduced or non-existent. If we are striving for a passive income, then this passive income must be able to cover the same. But the good thing is once we have achieved a sustainable passive income, it will provide without our input so a pandemic wouldn't affect us as much.

$ 0.00
3 years ago

I love reading this series. I wish I will be that stable to finance myself in the future with headaches no more. I will work on it to be financially free 💗 #BetterSeptember

$ 0.03
3 years ago

Thank you. I'm sure you can. I wish you the very best & this month ... #BetterSeptember!

$ 0.00
3 years ago

This inspires us to work smart and be smart in handling money so we could have enough to live off the future.

$ 0.03
3 years ago

Thank you. I wish you much success in your journey. :)

$ 0.00
3 years ago

Thank you. I pray for your success too

$ 0.00
3 years ago