Financial Freedom Is Doing Work You Love Without Worrying About money

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Here’s how you can get to financial freedom In less than 10 years

I have a very simple definition of financial freedom;

You have achieved financial freedom when you can spend your days doing work that you love without worrying about how you will pay the bills.

I think of this as my mission statement for managing my money and my career. I don’t want to retire.?I want to keep working, possibly forever.?I just want to be in a position where I can choose;

• What projects I work on.
• When I start and stop working.
• Who I choose to work with.
• Where I do that work.

Most importantly, I want all of that without worrying about financial stress from having a bad month or two.

If that sounds like a high-bar, that’s because it is.?High-bars lead to a better life.?The most miserable time in my life was when I set the bar so low that paying my rent and having money to go to the movies was considered a?good month.

Financial freedom is a high-bar, but we should all strive for it because it is one that we all have the capacity to clear. In this article, I discuss how to get started.

The financial freedom equation

If you want to do work you love without ever having to worry about money, you simply need to solve the financial freedom equation;

Financial Freedom= (Passive income + income from work you love) > Your living expenses

That’s it.

If you can make enough money through a combination of passive income and money doing work you love to cover your living expenses, financial freedom can be yours.

Let’s break each piece of that equation down further.

Passive income

The only true source of passive income comes from investment income.

• Dividends and capital gains from stocks.
• Interest earned from bonds.
• Rent collected from real estate.

Unless you have inherited a lot of money, the only way you’ll generate a significant amount of passive income is by?generating active income from working, living below your means, and investing the difference.

Here is another equation for you to fully understand what it takes to generate passive income;

Passive income= Your savings rate + Time

Your savings rate refers to the percentage of your paycheck you save and invest.?The higher your savings rate, the more money you’ll be saving relative to your monthly living expenses. This point is key because it’s not the amount of passive income you generate that matters; it’s the amount of passive income relative to your living expenses.

There are only three ways to increase your savings rate;

1. Maintain your living expenses and increase your income .
2. Lower your living expenses and maintain your current income.
3. Do both; increase your income and lower your living expenses.

Once you have gotten your savings rate up, the next thing you need to do to build real passive income is to wait.?The brutal truth about passive income is that it takes a really long time to build an investment portfolio that could cover your living expenses.

In a previous article , I detailed that by saving 20% of your income, it would take 38 years to generate enough passive income to cover your living expenses.

Passive income is a long-term game; think decades not years.

But that is okay because we don’t need to rely on our passive income to achieve financial freedom. Obviously, we want to keep investing and build up our passive income over the years. But in the meantime, you can still achieve financial freedom by supplementing your passive income with money you earn doing work that you love.

Getting paid to do work you love; the 10% rule to financial freedom

If you could earn enough money to pay your bills doing projects you are passionate about and have complete control over, you would have financial freedom.

That doesn’t mean you should quit your job. The income from your job can provide financial security for you and your family, and that is not something you should take for granted.

Instead of quitting your job, why not pick up a side-hustle doing something you love and have a goal of earning 10% of your current income from your side hustle over the next 12 months.

In the second year of your side-hustle, you aim to earn 20% of the income you earn from your day job.

If you keep going at that rate, you can put yourself on the fast track to financial freedom.

This brings me to?the 10% rule :

If every year you can replace an additional 10% of your current income doing work you love, you can achieve financial freedom in no more than 10 years.

When you can cover all of your living expenses doing work you love, you have achieved financial freedom.

The lower your living expenses, the faster you’ll reach financial freedom

Rember why our savings rate is so important; it’s the amount of money we save relative to our income.?The higher our savings rate, the lower our spending rate is.

The same logic applies to the 10% rule. The lower your spending rate, the faster you will be able to cover your living expenses doing work you love.

I created the chart below, which shows how many years it will take you to achieve financial freedom depending on how much of your income you are spending.

For example, if your living expenses are 80% of your income, it would take you 8 years to achieve financial freedom, assuming you could replace 10% of your current income doing work you love

Scalable income; the nitro in the financial freedom equation

In the 10% rule, I assume you are only replacing 10% of your current income doing work that you love each year. I picked this number because it is a realistic number for most people to achieve.

Remembering that high-bars lead to a great life, you may want to shoot for replacing more than 10% of your current income on a side hustle that you love.

To do that, you’ll need to start a side business that provides you?scalable income . That just means that there is no guarantee you will earn any money, but there is no cap on your potential earnings.

For the past three years, I have been working a side-business with scalable income, writing online, and selling digital products.

• In December 2020, I set a goal for my monthly income from my side business to match my 9–5 job by the end of 2021.
• I accomplished that goal in the first month of 2021 because my scalable income doubled in one month from December to January.

That highlights the power of scalable income; it has the potential to launch you into financial freedom in much less than 10 years.

You have what it takes to achieve financial freedom

Financial freedom is not a mindset; it’s a math equation.?By increasing your savings rate and slowly replacing your income doing work you love, you can achieve financial freedom much faster than you might have thought possible.

My final piece of advice would be to enjoy the journey. Try not to obsess about reaching financial freedom.?If you can’t find a way to be happy in your life right now, financial freedom won’t magically fix all your problems.

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This article is for entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.