Three Levels of Financial Freedom

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Financial Freedom is perhaps the most misunderstood and fascinating concept in the vast world of finance. While the illusion it gives is that it is very hard to achieve and is something that needs to be understood in more detail. 

Let’s talk about the three levels of Financial Freedom that can help anyone accelerate and achieve Financial freedom to live a more passion-based life.

Level 1: CLARITY

First, we need to understand what the REAL meaning of Financial Freedom is. Financial Freedom is surrounded by many myths such as 

  1. Financial Freedom cannot happen without a lot of money
  2. Financial Freedom only happens to the ‘Lucky’ or ‘Powerful’
  3. One has to be financially intelligent to be Financially Free 

The reality is that Financial freedom is a ‘Subjective Science’. 

Subjective, because REAL financial freedom means having an income that is ample & steady (for which you are not working) to take care of your lifestyle expenses. Because lifestyle expenses are different for different people, making Financial Freedom is a different number for each individual or family. Parallelly, it is also a Science because this is something that can be followed like a formula and created irrespective of a person’s background, financial acumen, education, etc. taking away the factor of luck or the need to be influential to become financially free. 

Although no real financial freedom is achieved yet, once the CLARITY of financial freedom is achieved, it sets the base on which further steps can be taken. A person can now aim in the right direction to achieve a life free of money worries undisputedly.

Level 2: Beating Lifestyle Expenses

Now that we understand what Financial Freedom really is, it’s time to take the first steps in this direction. As discussed before, the objective is to make more money without spending one’s time on it. And, the one thing that most people get misled on the journey of financial abundance is the confusion between using side income as Passive Income to achieve Financial Freedom. Just making more money from another job, a side business, or Youtube videos all require a lot of time to set up and manage for which we are trading our precious time with. Hence, it cannot be called passive. Sure, it makes more active income but at the cost of limited time, which is why it is better termed as a side income. 

So what is the best way to make Passive Income? 

The easiest way to make passive income is using our existing wealth in such a way that it creates another source of income for us. Our existing wealth can be in any form such as cash at hand, in the bank, investments in real estate, insurances, mutual funds, stocks, bonds, gold.  Our existing wealth can exponentially grow with defined strategies which are mostly automated these days or by taking onetime expert advice, ensuring minimum or no ongoing time and effort is needed to create a sustainable income for any individual. 

The aim is to get to a level whereby whatever the monthly household lifestyle expense is, say Rs 2,00,000 per month can be achieved simply from the income coming out of the management of all the financial and non-financial assets a person already owns.  

This is a state of financial affairs once achieved can drastically change one’s financial well-being and ease of money management in life. 

Level 3: Beating Active Income

This is the final and hardest level to get. When a person’s Passive Income is able to exceed the Active income (from their business, job, or profession) then a person is completely free of the need to do those things with which they are not aligned. This could be saying no to a client, to an employer or simply starting something completely new just to explore one’s passion. It is intriguing to note that ‘Money is the biggest distraction on the journey towards one’s passion’ & this level unblocks the path for a person to reach their ultimate genius. However, it is easier said than done as it would require a windfall capital, an exponential growth of wealth, or a low level of active income. Expert guidance in the same field can drastically help to achieve this level. 

This is a state of financial affairs once achieved can drastically change the outlook in life and can inspire a person to only focus on their ultimate passion or purpose be it starting companies like Tesla, following the philanthropic path or just living an ultra-luxurious life.  

Whatever level a person may currently be it these three steps can lead to the ultimate liberation from money worries and time to live a life on their own terms.