What is Financial Indpendence?

I have been asked a few questions about Financial Indpendence.

Let us see the definitions of some of the financial terms related to it.

Base on the definitions extracted from wikipedia.org.

Financial independence is the status of having enough income to pay one's living expenses for the rest of one's life without having to be employed or dependant on others. Income you earn without having to work a job is commonly referred to as passive income.

Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it. Any kind of cash flow property income – which includes profits from ownership of capital, rent from ownership of resources such as Rental income and incoming cash flow from property or any piece of real estate, and interest from owning financial assets

Salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed. Salary is commonly paid in fixed intervals, for example, monthly payments of one-twelfth of the annual salary.

From the above definitions, we can see that passive income is different from salary. The income from salary require an individual to trade in his time and effort in order to receive an income, once the individual becomes unable or could no longer work, the income stop. Passive income however does not stop even after an individual stop working.

As we can see, having passive income is the key to achieving financial independence. It free up more time for us to pursue our passion, less worry about losing income or chasing after money. There are many ways to create passive income from different platforms such as rental Income from properties, dividends from stocks invested, royalty fees etc.

But why seek financial independence? 

Because life is short. There are people who do not want to spend their entire life trapped in the rat race chasing after money.  They have a purpose in life to pursue their passion without worry about income, which can be as simple as spending more time with family and on hobbies. 

Each individual has different level of financial status, which can be judged based on the below image, extracted from Investment Moats website created by another blogger Kyith. Kyith has posted a detailed article. 'The 11 Stages of Wealth: Which Stage of Wealth are You at?'which can be found at:

https://investmentmoats.com/financial-independence/stages-of-wealth-financial-independence/

Interesting isn’t it? I have been using this as my guide to gauge my financial level. For now, I am at level 8, hopefully one day I will be able to attain level 9. 

There are many useful tips and guides on achieving financial independence, they are everywhere and I have benefited greatly from financial bloggers and websites. In this age of social media, all we need to do is google it!

Here is an inspiring quote I learn today:

“Impossible is not a word. It's just a reason for someone not to try.” 

So, my advice for those still chasing after money and waiting for paycheck to pay your bills. Start your financial journey by taking CONTROL of your LIFE. Start EXPLORE!!!!