Before we address the issue at hand, lets make sure that we are clear on the definition of financial freedom. Up until 4 or 5 years ago, I had a warped perception of financial freedom. I pictured it as a life of leisure with a couple million dollars in the bank. After taking on too many unnecessary risks trying to attain that goal, I stopped to rethink my definition. I realized that financial freedom doesnt require millions of dollars. As long as you have enough to cover your yearly expenses and a method to replenish your coffers, you are there. That sounds sort of like a job. However, even using that as a definition only a few working people would meet the criteria. Most need a job and a few credit cards to make ends meet. I redefined it as follows:

Financial Freedom is freedom to focus on what is truly important to you and your family without having to trade time for a wage. It is enabled by a portfolio of income producing assets, managed by you, which generates sufficient income to cover your yearly expenses on an ongoing basis. It provides both time and money.

We have prepared our entire lives for the time for money swap. It is simply what responsible people do. You commit 40, 50 or 60 hours per week and the company commits to pay you for your efforts and in some cases extremely well. The concept of not exchanging your time for a wage is so foreign for most that financial freedom will never be seriously considered. Many will dream about it, but life will slap them back into reality. The few who choose to ignore lifes slap must be willing to make the following three commitments.

1. Make time to become free. I submit that this is the number one reason why there are so few people that are financially free. Most are just too busy with life. Financial Freedom requires sacrifices and it begins with making a time commitment. Initially you will need time to study and eventually to implement your plan. The easiest place to find extra time is by reducing your number of hours of sleep each night. Start by reducing your sleep time by an hour. As your plan starts developing other items will lose their importance, freeing up more time for your plan. Before I left corporate America, I would put in a full 9-10 hours on the job and come home and work my plan for another 5-6 hours each night. One of the benefits of financial freedom is time to focus on whats important to you and your family, but to receive that you must initially sacrifice some of your precious time.
2. Know your business. In preparation for your current career, you have spent years going to school and have attended seminars and training classes to attain additional expertise. Financial freedom requires a similar commitment. Unfortunately, there are no formal classes or degree programs. You must educate yourself and learn by doing. The lessons learned from a failed business deal or significant stock market loss is more valuable than any course attended or book read. There are three primary paths to financial freedom - real estate investing, small business ownership or trading markets (stocks, bonds, commodities and/or currencies). I have tried all three. Each venture has added significantly to my business knowledge repository. You must always be looking to learn. Seek out mentors. Pay your tuition to the school of hard knocks.
3. Buy Assets. Financial Freedom requires that you create passive income. That is income that does not come from wages or your active business participation. Rental property or dividend paying stocks are examples of assets that generate passive income. Your financial freedom plan involves mapping out strategies to add assets to your portfolio. Once you have enough passive income to cover your yearly expenses, you are free. All of our lives we have been told that our home, cars and boats are assets. Instead of arguing that point, I would like to introduce a new term core-assets. Core-assets are all items of value less non-income producing assets. Items such as your home, cars and boats unless used in a business are non-income producing. So, core-assets are only items that produce income such as rental property or a limousine. Financial freedom requires that your spending is focused on buying income producing or core-assets.

Michael Dawson

Michael Dawson recently said goodbye to a 20 year career in Engineering, Marketing and Sales to focus on living his dream of financial independence. He has since founded The Time and Money Group as vehicle to encourage others to do the same. His mantra is "Why trade time for money, when you can have both."