Financial Freedom = Non Linear Incomes - Expenses > Zero
Non Linear Income = Passive Income/Residual Income
Linear Income refers to income your earn from exchanging your time whereby you use your daily 8 hours and 22 days a month to exchange for salary or wages.
Passive income = income not earned from work. The term passive income implies that the income is from the cash flow generated by assets owned.
Type of passive income:
Ø Royalties from books published
Ø Dividends from public company stocks owned would usually be considered portfolio income, but might be regarded as passive income for the founder of the company.
Ø Rental from property
Ø Interest from saving/fixed deposit in bank
The key word in passive income is accumulating enough asset to generate the constant cash flow.
The usual rationale for wealth accumulation is to have sufficient passive income to obviate the need to work. (of course, you can always work if you like to but you do not really on the work’s wages for living).
Thus, the formula of financial freedom is Monthly Passive Income - Monthly Expenses = H, the bigger the positive H is, the more freedom you are and the more happy you will be.
And the secret for financial freedom is enhancing the monthly passive income and reduce the monthly expenses.
We can increase the monthly passive income with many ways, I will add in more on this in the next section. (Way to increase passive income)
We can reduce the monthly expenses by following the steps below: (Way to reduce monthly expenses)
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