Ask people what they want most out of life, and more often than not they will tell you that they want to be rich, wealthy or financially free. Some of them will tell you that they want to live in a large house or mansion with a huge backyard swimming pool, gold-plated sinks, a butler and/or a maid, etc., but usually these are just fantasies they have about what wealth is. Certainly there are some very wealthy people who live this type of luxurious lifestyle, but as Thomas J. Stanley documented in his now famous book, The Millionaire Next Door, most people who have obtained great wealth and money tend to live more modestly than the media would have us believe. In fact, may wealthy people and millionaires tend to drive dependable and luxurious but not necessarily flashy cars, live in well-designed but not overly huge houses, and they don't buy the most expensive clothes from the hottest designers du jour every weekend. In fact, if you ask these people why they wanted to become wealthy in the first place, nearly all of them will tell you that they wanted to become wealthy to have more freedom to choose the things they want to do in life.
What is your goal for financial freedom? Do you want to live a lavish luxurious lifestyle as portrayed on Entertainment Tonight, Access Hollywood, E! or VH1? Do you want to have a lot of money to travel the world? Or do you just want enough money so that if you suddenly quit your job, you could sustain your current lifestyle? All of these goals are possible, yet some of these will take more wealth building than others.
Financial freedom is the ability to have enough wealth so that you can quit your job and never be forced to work again to sustain your lifestyle. Now this will vary for many people. If your lifestyle consists of having a big house with two luxury cars, being able to take multiple vacations every year, and buying lots of expensive clothes, jewelery, and gadgets, then your income is probably very high or you have leveraged yourself to the hilt in debt. However, if your lifestyle is more modest, and you live in a condo or small house, and you keep your expenses low, then you probably can get by on even a mid five-figure income. But how do you determine what you need to get financial freedom?
R. Buckminster Fuller once commented that your wealth is determined by the amount of money you had saved divided by the amount of time you could sustain your current lifestyle if you had suddenly lost or quit your job. For example, if you had saved $10,000 and could live on that for five months, then you were five months wealthy. If you had saved $40,000 and could live on $2,000 a month, then you were 20 months wealthy. However, what if you could use those savings to build an income that you make you infinitely wealthy? This can be done by having passive income. Passive income is money that you receive that you do not have to work for through employment. In other words, you make money even when you sleep. Most often, passive income is made through your own business, real estate, or investments such as stocks or bonds.
Creating your own business
Many people have become wealthy by creating their own business. Usually they started out doing some hobby that they loved like baking or arts and crafts and people would pay money for their products or services. You can do this as well. The easiest way to start would be by selling your old unwanted products on Ebay. Many people started their home-based businesses by selling their old junk on Ebay, only to find that it was very lucrative for them. Then they would pick up old items from yard sales, the Salvation Army thrift stores and Goodwill, and resell those items for profit. If you are internet savvy, you can sell other people's products through affiliate programs. Affiliate programs allow you to sell products from other people's websites and make a commission on each sale if a person buys an item through your website or blog. Some places to start looking for affiliate programs are Clickbank, Linkshare, and Commission Junction.
Make money through real estate
Real estate is one of the most common forms of wealth building for the average person. In the past few years, real estate has become a wildly popular way to make a lot of money, yet it appears that we may be on the verge of a housing bubble which is about to burst. Most of this housing bubble can be attributed to the process of flipping properties, where some person buys a home or condo with a huge mortgage and hopes to resell the property at a later date through price appreciation. Much of this was encouraged through late night television informercials. While these strategies do work and can make you a lot of money in a short period of time, they have their drawbacks. First of all, it's not necessarily a steady stream of passive income, and second, you can find yourself without any buyers if the market peaks too soon.
Of course, the old-fashioned way of making money through real estate is buying rental properties. You buy a two or three flat or small apartment complex building and rent out the remaining space to tenants. If you structure your mortgage and rents well, you will cover the cost of the monthly mortgage, taxes and insurance through your tenants' rent payments plus have extra money left over to spend. It's not uncommon in some areas to make a sizable rental income on a modestly-priced apartment building, and some people simply make a living just by providing housing to others.
Making a passive income through stocks and bonds
Now this is an easier way to make passive income than real estate, but it takes more money to do this, plus you have to know your stocks and bonds well enough to stick through your investment. Passive income in this case is generated through dividends. In other words, when you buy shares of stock, treasury bills or bonds, the company issuing the shares of stock (or the U.S. Treasury Department, in the case of bonds) will pay you a cash dividend for investing with them. Now usually, this only consists of a few cents per share or a small interest rate, but if you buy enough shares or bonds, this can generate a huge income for you. In some cases, it will pay you a huge interest percentage, or yield as it is often called, and this yield will often pay much more than bank deposits. Plus you still own the underlying shares of stock which you can sell for appreciation, or in the case of bonds, hold until maturity. For instance, you buy $400,000 worth of stocks which pay an annual dividend equivalent to 12 percent. You would receive $48,000 in dividend payments from this stock. Lets say that you hold on to this stock for five years, and its value appreciates to $650,000, at which point you decide to sell your shares. Not only would you have received $48,000 for each of the last five years, but you would have realized a capital gain of $250,000 from selling your shares (before commissions and taxes).
Of course, this only skims the surface on how to obtain financial freedom. If you tend to live more modestly, you can probably obtain financial freedom more quickly by buying income-producing real estate or starting your own business. If you want to live more luxuriously, you may have to create a complete wealth building plan. One of the best sources I've seen that deals with wealth building strategies is Safe Strategies for Financial Freedom, by Van Tharp. Of course, you can learn more wealth building strategies by going to Pat's Planet.net or Wealth Creation Tips at http://tipsonwealthcreation.blogspot.com.
This article was written by Patrick Huey, who wants you to make money and become financially free. Learn more of the great wealth building tips by going to http://tipsonwealthbuilding.blogspot.com or by going to Pat's Planet.net at http://pats-planet.net