Financial Freedom: The B-Plan

When it comes to financial freedom we believe that you need to have these 3 ingredients:

  • A dream, in this post we explain why
  • Your A plan, answering the question: “How get I can wealthy in a short time?”
  • And you B plan, which we are going to cover in this post.

The B plan answers the question “If I don’t find my great idea to become rich quickly, how can I make sure I will be financially free one day?”

So, in order to do this, you need to clearly state the aim of the game. A person is financially free when her/his passive income is equal or superior to the money that he/she needs to live the chosen lifestyle. This means that financial freedom is about having more time and having to work less or not having to work a lot. As an example, you would be financially free at 50% if your automatic or passive income was enough to take care of 50% of the expenses you need to maintain your lifestyle. In such situation, you could work less hours and still live the same life. This is very interesting because it shows that we only need a certain amount of money and this amount varies accordingly to our needs and wants. If you want to be 100% financially free with a super luxury lifestyle you will need way more money than the person who is happy with a house in a more remote area and living simply. This depends on you but is important because it defines your number and your objective. You need to set up a S.M.A.R.T objective for yourself, something Specific, Measurable, Attainable, Real, Timed otherwise you might end up disappointed.

After this, you need to work on several things all of them come to this: improving your cash flow. First, assess your asset and liabilities. Assets are those things who generate money even if you don’t work on them: investment, a property you rent, a saving account or shares, whilst liabilities are those things who make you poorer and get money off of you even if you don’t spend them: debts and credit cards for example. As you want to reduce your liabilities and increase you assets as much as you can, you want to make sure that you are able to save money, which means reducing your costs by reassessing your needs and wants, and increase your income by investing in yourself and in valuable assets (check out our video about a very nice way to manage your salary). We suggest you to build a budget so that you can stick to that and commit to a saving plan. Also, give a good look to your bank statements and think if all those expenses were really worthy and if you wouldn’t have have more satisfaction in doing something else, maybe cheaper, or free! Months after months you will see the situation change, while you pay off your debts, more money are left for you to save even faster. While you increase your investments, more money will be generated to grow your assets faster and achieve your goal. It is important that while you get able to generate more money you increase your commitments into saving and reinvest your incomes, there is a great thing you can leverage which is called compound interest. Compound interest works over time, look for a mortgage simulator online and see what happens when the bank loans to you, over 30 years, the money you need for your house…you end up paying several times the value of the entire property! Think if you could use this mechanism for your benefit and to increase your wealth!

It is not something that happens overnight but with the right focus, it will. We have been working this way for 18 months and we can appreciate differences already, even if we will see amazing things starting to happen in 3.5 years time. This is the power of compound interest, at the beginning it is slow but in time, things move faster and faster.

If you are committed we hope that our experience and has been helpful for you and we want to highlight that you will definitely need a plan and some knowledge/study on finance topics to get results. We invite you to check out our post about “The importance of a plan” and the reading section for some helpful books.

Talk soon

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