#LetsDoBusinessWithAisha is designed to help us start a business or improve on an existing business with the aim of attaining financial independence
Today we would be discussing FINANCIAL INDEPENDENCE
What is financial independence? Financial independence is a term generally used to describe the state of having sufficient personal wealth to live indefinitely without having to work actively for basic necessities. When your passive income can take care of your expenses then we say you are financially independent. What is passive income? This is the money earned without having to work for it. There are different sources of passive income. It could be from Rental Properties for example you build a house and put in tenants and collect rent. You are no longer working for the money you are earning from the rent. The money comes in when the rent is due like clockwork (make sure you have a good agent). It would be paid as long as there are tenants in that house. Rental Properties is a source of passive income. Also dividends from stocks and shares is a source of passive income. I know some people don't want to hear about shares because of the fact that our fingers were burnt a few years ago in the stock market collapse. We have to understand that most of the investments we did then when shares were in vogue was all about capital gain. Capital gain is when you buy something sell it, and take the difference (profit ). It wasn't about cash flow. Cash flow is when you have investment and it keeps yielding income on and on. Let me give you an example. If you have a poultry farm and you keep broilers for 10-12weeks then sell the broilers and make some money that's capital gain. On the other hand if you decide to keep layers that keep laying eggs and you are selling and they keep laying that's cash flow. The kind of investment we need to do with shares is having shares that would be bringing dividends. That would be a source of passive income. You can also have passive income from royalties either from books you have written or from patent. Maybe you invented something and you begin to get money from that. More reason why we need to fight piracy in this country. Business ownership is also a source of passive income. You can be a sleeping partner in a business. You invest your money but not actively running the business. Somebody else is running the business and you would be getting some money.
Today we would be discussing FINANCIAL INDEPENDENCE
What is financial independence? Financial independence is a term generally used to describe the state of having sufficient personal wealth to live indefinitely without having to work actively for basic necessities. When your passive income can take care of your expenses then we say you are financially independent. What is passive income? This is the money earned without having to work for it. There are different sources of passive income. It could be from Rental Properties for example you build a house and put in tenants and collect rent. You are no longer working for the money you are earning from the rent. The money comes in when the rent is due like clockwork (make sure you have a good agent). It would be paid as long as there are tenants in that house. Rental Properties is a source of passive income. Also dividends from stocks and shares is a source of passive income. I know some people don't want to hear about shares because of the fact that our fingers were burnt a few years ago in the stock market collapse. We have to understand that most of the investments we did then when shares were in vogue was all about capital gain. Capital gain is when you buy something sell it, and take the difference (profit ). It wasn't about cash flow. Cash flow is when you have investment and it keeps yielding income on and on. Let me give you an example. If you have a poultry farm and you keep broilers for 10-12weeks then sell the broilers and make some money that's capital gain. On the other hand if you decide to keep layers that keep laying eggs and you are selling and they keep laying that's cash flow. The kind of investment we need to do with shares is having shares that would be bringing dividends. That would be a source of passive income. You can also have passive income from royalties either from books you have written or from patent. Maybe you invented something and you begin to get money from that. More reason why we need to fight piracy in this country. Business ownership is also a source of passive income. You can be a sleeping partner in a business. You invest your money but not actively running the business. Somebody else is running the business and you would be getting some money.
It does not matter how old or young you are or how much money you have or make, if you can generate enough money to meet your needs from sources other than your primary occupation then you have achieved financial independence. Let's take an example a young man of 25 who's monthly expenses is about 10k and he earns 11k from passive income then that young man is financially independent because he has a source that even if he is not working keeps generating income that exceeds his present expenses if he gets married and his expenses increase and exceeds his passive income he would no longer be financially independent. On the other hand, a man of 50 who has worked for the last 23 years and is a Director in a big company and earns 1m in a month but has expenses of 1m and 5k and not a single passive income is not financially independent. This man most of us would call big man because he lives in a big house probably rented, drives the latest car is not only financially dependent but is also getting in debt. God help him if he loses that job or get retired.
For us to be financially independent there are basic things we need to understand. Top among them is the fact that income is not wealth. Most people believe that the key to wealth is a high paying job. Yes it is easier to amass assets if you have more money coming in each month but the true secret to increasing your net worth is to spend less than you make and invest that in Ventures that would yield passive income.
For us to be financially independent there are basic things we need to understand. Top among them is the fact that income is not wealth. Most people believe that the key to wealth is a high paying job. Yes it is easier to amass assets if you have more money coming in each month but the true secret to increasing your net worth is to spend less than you make and invest that in Ventures that would yield passive income.
CREDIT: AISHA YESUFU (@aishayesufu)
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