How do we ordinary people achieve "financial freedom"?

In recent years, "financial freedom" has become a hot word. For ordinary people, the joking meaning of "financial freedom" is greater than its real meaning. For example, when vegetable prices increased in the past few years, people joked, "I want to achieve vegetable freedom as soon as possible." In the past year, fruit prices soared, and many people shouted: "Hurry up and let me achieve fruit freedom." Many people just talk about it without really thinking about how to achieve "vegetable freedom", "fruit freedom", etc.

Financial freedom is a general term. It does not specify how much family assets must reach to achieve financial freedom. However, there is a standard to measure financial freedom, that is, when a family wants to buy or consume something, it will not worry about money; when one does not work one day, the family's funds will not be strained due to unemployment. So, under what circumstances will family funds not be tight if you don’t work?

Let’s first analyze the source of family funds. Our income is divided into two parts: salary income and financial management income.

Wage income means working one day, doing one thing, and one day's income. If you lose your job one day, you will have no income. We can also call it "active income", which is called "active income". Make money in life”. Financial management income is through various investment channels, such as investment bank financing, bonds, funds and even entities, etc., so that the money in hand can generate more money. In this way, even if you don't go to work one day, your money is still working for you, and you can make money while lying down. We call it "passive income" and "money begets money". Seeing this, everyone may say, of course passive income is good, you can make money while lying down, how comfortable it is. However, it is obvious that if you want to "make money from money", you must first have "money", which is inseparable from the first step of "making money". Only by working and obtaining a certain amount of original accumulated funds can we invest and earn more income. When your passive income can fully support your normal family living expenses, you can proudly say: "I have achieved financial freedom." For example: If your family's normal annual expenses are 200,000, and you can get an investment return rate of about 7 through investment and financial management every year, 20/7 = 2.86 (ten thousand), that is to say, if you have not If the funds below 2.86 million are used for investment and financial management, congratulations, you have achieved financial freedom. Financial freedom is every family's dream. Converting dreams into goals and achieving them depends on finding the right method, one step at a time, and tireless and continuous efforts.

So, how do we ordinary people achieve financial freedom? I believe that by taking the following steps, you can move forward on the road to financial freedom. First of all, you must learn to keep accounts. Accounting is the best way to understand a family's asset structure, income and expenses. Nowadays, there are more and more kinds of accounting software, which are becoming more and more convenient. For example, Sui Note has various functions that can meet the various needs of an accountant. Through accounting, you can clearly understand the source and whereabouts of every money in your home, and it will also facilitate future inquiries. Accounting is a serious matter. We cannot fish for three days and dry the nets for two days. Only after we have recorded the accounts can we proceed with the following work.

Second, learn family budgeting. In Sui Note, you can set a monthly family budget at the beginning of each month. So how do you set a monthly budget? This requires analyzing what are necessary expenses and how much they are based on the accounting records of previous months; which are non-essential expenses and must be controlled. Then increase or decrease funds based on the actual situation of the month. Once the family's monthly budget is ready, subsequent consumption will be based on that month's budget. This can control many impulse purchases, commonly known as cost-saving.

Third, insist on review after the fact. After each month, take stock of the previous month’s income and expenses. In terms of revenue, what is incidental and what is sustainable? Anything that is unsustainable is not worthy of envy! What we value is sustainable income, and we need to grasp it more firmly in the days to come. In terms of spending, check where there are impulse purchases, see if there is anything that needs improvement, and prepare for next month’s budget.

Fourth, outside of work, find a part-time job that suits you. You can use your expertise to work part-time, or you can use your connections to work part-time.

Jobs and part-time jobs are the top two sources of active income. Working part-time can not only gain money, but also gain a positive life. Finally, learn to manage money. This is the most important part. Whether you can achieve financial freedom depends on whether you know how to manage money. Through the above steps, family funds are slowly accumulating. At this time, financial management becomes urgent. Financial management can allow family funds to grow rapidly in the form of compound interest. Ordinary people's financial management focuses on stability.

So, how do we ordinary people plan our family finances?

First, ensure the safety of funds. At all times, we must put financial safety first. You know, we all earned this money with our own hard work, and every penny is reflected in our blood and sweat. When we protect our principal, we also protect the little golden goose. Although high risks bring high returns, when the risks actually come, our ordinary families simply cannot bear the consequences of high risks.

Second, families should keep appropriate liquidity for emergencies. So, how much is “appropriate”? According to the "Standard & Poor's Household Asset Allocation Chart", a family must retain at least 3-6 months of normal living expenses as working capital. We can put this money in monetary funds or current deposits in innovative banks. We can not only enjoy interest income that is much higher than bank current deposits, but also ensure that we can withdraw it at any time.

Third, configure appropriate insurance for each member of the family. In addition to social security, appropriate commercial insurance can also be added based on the actual situation of the family members. Insurance is a guarantee for the sustainable and stable development of a family. When a disaster or accident occurs, the family's funds will not return to before liberation overnight.

Fourth, family financial management should be diversified. Nobel Prize winner in economics James Tobin said: "Don't put your eggs in one basket." In fact, he is telling everyone that in asset allocation, we must learn to reduce risks by diversifying investments. We can invest in bank finance, bonds, funds, stocks and even real estate. Diversification of financial management is not limited to diversification of varieties, but also diversification of term lengths. Diversified allocation of term lengths can make financial management funds more flexible and more adaptable to family needs.

Finally, don’t invest in areas you don’t understand. Investment cannot be based on the principle of "use". Never hear someone say that so-and-so is making money, and just follow others and invest their money. This kind of muddle-headed way of making money will make you lose your principal sooner or later. If you want to clearly make money through financial management, you must keep learning financial management knowledge, so that you can go more steadily and further on the right path of financial management. If an ordinary family can do the above, your family financial management will be like a thriving seedling that will bear fruit sooner or later. I believe that "financial freedom" will not be far away from you.

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