Understanding True Wealth Freedom
The Illusion of Wealth Freedom
Many of us have dreamed of achieving wealth freedom. We think that once we save 10 million or 30 million, we can retire and travel the world. We believe that by simply relying on dividends from stocks, we can achieve this goal. However, the truth is far from what we imagine. The freedom we think we know is just a daydream.
True wealth freedom is not about having a large amount of money in the bank or a high stock portfolio value. It's about nurturing your own "cash cow" that generates a continuous stream of cash flow. Even if you do nothing, money will automatically flow into your account.
The Importance of Cash Flow
You might be thinking, "How is that possible? I'm struggling to save money, and I can't even imagine having enough to be truly free." The first question to ask yourself is, "How much money do I need to save to be truly wealth - free?"
Many people say 10 million might be enough. But have you considered your annual expenses? If your basic annual expenses are 1.2 million, 10 million will only last you about 8 years. And this doesn't account for inflation, medical expenses, family care, or children's education. Life is not a static Excel spreadsheet.
On the other hand, if you have a system that can generate a stable monthly cash flow of 100,000 yuan, you will be more at ease and have more choices, even if you only have 500,000 yuan in your account.
Calculating Your Wealth Freedom Threshold
To truly understand wealth freedom, you need to calculate your own wealth freedom threshold. Here's a simple formula:
- Calculate your monthly basic expenses: List all your expenses, including food, transportation, rent, credit card bills, utilities, insurance, household expenses, filial piety expenses, and children's education expenses. Let's assume a family's monthly basic expenses are 60,000 yuan.
- Calculate your annual basic expenses: Multiply your monthly basic expenses by 12. So, 60,000 yuan × 12 months = 720,000 yuan.
- Determine the required passive income: Imagine that this amount of money is completely covered by passive income. If your investment tool has an annual return rate of 5%, you can calculate the required principal as follows: 720,000 yuan ÷ 5% = 14.4 million yuan.
Creating Multiple Cash Flow Streams
This number might seem daunting, but it's important to remember that it's just a starting point. In reality, we can create multiple cash flow streams to significantly lower this threshold.
For example, you can earn 20,000 yuan per month in rent (240,000 yuan per year), 10,000 yuan per month in dividends (120,000 yuan per year), and an additional 200,000 yuan from part-time jobs or side hustles. In total, you'll have 560,000 yuan in cash flow. This reduces the pressure from the 14.4 million yuan required initially to just filling a relatively small gap.
Small Steps to Build Cash Flow
Cash flow doesn't have to be huge. It can come from small sources. For instance, if you can earn an extra 3,000 yuan per month by taking on freelance projects or selling handmade cookies, that's 36,000 yuan per year. This money can be used to pay for insurance, rent, or further investment.
The Power of Cash Flow
True wealth freedom is not about having the most savings. It's about designing a cash flow system that allows money to come in on its own. You need to calculate your monthly expenses and understand how much of your income comes from active work and how much comes from passive income (your "cash cow").
If you're not good at managing your finances, don't rush into investing. You need to master the basics first. Saving money by sacrificing your social life, new skills, or hobbies might not be the best strategy. Instead, invest in yourself and design a cash flow system.
Common Mistakes on the Path to Wealth Freedom
Many people make these key mistakes on their journey to wealth freedom: 1. Only saving, not creating cash flow: They focus on saving money but forget to build a system that generates continuous cash flow. 2. Lack of financial literacy: They have no idea about their own financial situation and numbers. 3. Considering wealth freedom as an unattainable dream: They never seriously design a plan to achieve it. 4. Waiting to have money to start: They end up never starting at all.
Starting Your Wealth Freedom Journey
If you're ready to start your journey to wealth freedom, here are three cash flow tools suitable for small - earners: 1. Dividend - paying assets: If you have some spare money, start with dividend - paying assets like certain Taiwanese or US ETFs. These have a low investment threshold, and you can receive regular cash dividends. 2. Lifestyle side hustles: Use your hobbies or skills to earn extra money. For example, baking and selling cookies, doing delivery, or offering design services. 3. Sharing economy income: Rent out your unused resources like a motorcycle, a spare room, or idle equipment.
Taking Action
Here are three specific actions you can take right now: 1. Calculate your monthly basic expenses. 2. Inventory your available resources. 3. Share in the comments which cash flow method you're most interested in trying.
Wealth freedom is not a distant goal. It's a habit that starts with taking the first step. You don't need to be rich to start, and you don't need to wait for the perfect moment. Start small, and gradually build your cash flow. You are the key to your own wealth freedom.