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Monday, July 2, 2012

The Difference Between Wealth and Financial Independence (Part 2)



In the first part of this article I wanted you to think of how much money you need to live the life you want. So you should have by now an idea of the lifestyle that you want and the money you need to achieve that lifestyle without having to go to work every day for it. 

You are now creating a vision...and end goal...a picture of how you want your life to be. Next step then is to set the wheels in motion now. 

Planning to Achieve Financial Independence

Now that you know how much money you need to cover your expenses in order to be financially independent you want to have that money come from a source you don’t have to “work for”. Meaning that this money must come to you whether you get out of bed every morning to work or not.

This is where financial planning and learning to grow your money come into play.

What is going to give you the income that you want?...

Are you going to accumulate a big pile of money that is going to sit in a savings account and then withdraw from it?

Are you going to have really large 401k or IRA and make withdrawals from it when you reach the allowed age for withdrawals?

Are you going to be receiving income from rental real estate that is paid off?

Are you getting income from a pension/retirement plan from a previous employer?

Are you getting income from a business you started/operated and now it’s run by others?

Are you receiving commissions/royalties from a product you invented/created and is still selling?

Are you receiving interest/dividends from a stock(s) portofolio you assembled and grew enough to produce a lot of income?

I could go on for a while…the point is that there are numerous ways to create a source of income that will allow you to reach financial independence. The one thing they all have in common is that you need to set a goal, make a plan for how you are going to achieve it and take action.

Nothing will happen if you don’t take action.

Once you know the number you need to reach financial independence then you choose a strategy that can get you there. I for one firmly believe that real estate can get me there and that is the plan that I am working. I would encourage you to consider real estate but I also understand that it might not be for you.

Regardless of the medium you choose the bottom line is that you develop a source of income that is independent of how many hours you work if you work at all. So part of your homework is to research, choose and start a strategy to increase your income now and to create passive income in the future. 

The next piece of the financial independence puzzle will help you tie it all together. That will be part 3 of this series >>>>>>

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4 comments:

  1. Good read. I for one agree with what you say here. I have noticed that just living on a paycheck and putting some money on a 401k at work will not be enough if I want to retire or not work until I am 65!

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    1. Jona, that is a good observation. There is nothing wrong with a 401k but to rely on it and think that it will be enough to create the financial independence from Corporate America is a delusion.

      There is nothing wrong with having a job or being in Corporate America if that is what you want. But even if it is achieving financial security should still be a priority, that way you get to show up to work because you want to not because you have to...big difference.

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  2. I have to agree with you that relying on your 401(k) and Roth IRA is not a good idea. If you're willing to take a little risk, you could buy stocks, bonds or mutual funds but be prepared to let go of your money because it could be gone in an instant. Now investing into real estate which is a tangible form of investment is something you should consider.

    If you want to know more about real estate investing, you may visit my site at http://courseinrealestate.com

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    Replies
    1. Thanks for reading.

      I agree with you on investing in real estate, becase it's tangible is one of the reasons I like it. I am not sure I agree that with buying stocks and bonds the money will be gone in an instant but they certainly carry a level of risk.

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