Latif Ahmed

When it comes to financial independence many of us want to be millionaires. Many of us believe that hitting that magic number of $1 million is the ultimate sign of financial security. Still there are others who set the mark at a $10M or even higher than that!

How much do you really need to be wealthy? Do you really need that $1 million dollars. More often than not, the number is lower than that for most people to be financially free. To figure out what this magic number should be we need to first define what does it mean to be financially free. Different people have different definitions of financial freedom. For some it means that they can buy the house and car of their dreams in cash and have the ability to take several vacations per year to exotic locations. To others financial freedom means that they have enough money to live on when they retire. One of the best definition of financial freedom that I have come across is the one provided by T. Harv Eker in his book “The Secrets of the Millionaire Mind”:

  “Financial freedom is the ability to live the lifestyle that you desire without having to work or rely on
  anyone else for money.”

The author of this book explains how to be financially free one needs to earn money without working. This is also referred to as earning passive income. Financial freedom occurs when your passive monthly income equals or surpasses your monthly expenses so that you do not have to rely on your active income to survive. Passive income is defined as the income that you receive from a business that can run without you while active income is defined as income that you have to work actively to earn. Some of the sources of active income are:
  working as an employee in a company,  being self employed as a doctor or dentist being employed as contractor or consultant

Some examples of passive income streams are:
   dividend income from halal stocks or mutual funds  income from direct investment in other people’s businesses  rental income from real estate holdings  licensing of an idea or product  royalties  income from affiliate programs

Note that in the definition above, there is no reference to waiting until retirement to be financially free. One can become financially free at any age as long as your living expenses are covered by your passive income stream. Thus to figure out your financial freedom point you will first need to figure out what are all of your monthly expenses.

Next figure what you are going to do to setup your passive income stream. Most people do not have any source of passive income streams and they end up either delaying or never achieving financial freedom. Some ideas for passive income streams have already been mentioned above. Feel free to come up with more ideas for passive income generation as there are many ways to make money work for you instead of you working for money.

ACTION PLAN

So what are you waiting for? If you are serious about being financially free then you need to take the necessary steps to generate income from one or more passive income streams.

Choose one or more from the list above and then get started in making your dream a reality!