Somebody asked me today what the term 'Financial Freedom' really means. The trouble is that it's a bit difficult to define, because we are all different and want different things.
In a nutshell, I believe that you have truly achieved financial freedom when you can live off your passive income without having to hold down a 'job' (where you are paid a salary for the time you have worked).
Dependent on your lifestyle, i.e. the way you live, this can be quite difficult to achieve or it can be quite easy if you 'downsize' enough.
In the Cashflow 202 Game, if you draw a Capital Gain Deal card that
states that MYT4U is at $40 which is at the top of its range, you can
then short sell it.
If you want to understand the concept of shorting stocks, read this:
Shorting Stocks and Shares in the Cashflow 202 Game
The procedure is that cash amounting to $40
times the number of shares that you sell is placed in the MYT4U
envelope. This is the cash that has been placed on margin as it is not
yours until you buy back the stock at a later date.
If you or
somebody else picks up a Capital Gain Deal card allowing you to sell
MYT4U at $20, then you collect half the cash in the envelope. This is
because the price of the stock has also halved. However, if MYT4U goes
bankrupt, then the share price drops to zero and you collect ALL the
cash in the envelope.
Remember that the rule in Cashflow 202 is that you must buy the stock at the next available time whether you want to or not! So, there may be the case where the price of MYT4U
goes up to $50 (outside it's normal trading range). If this happens, you
get none of the money in the envelope and have to pay the bank an
additional amount to cover your loss.
Remember that the amount of
cash you get from the envelope is equal to the difference between the
selling price and the price at which you bought the stock back, times the
number of shares.
A while back, a friend and I designed and built this fruit machine as a project for others to construct. It was featured in 'Everyday with Practical Electronics ' magazine.
What I didn't realise was that it has been providing me with little bits of passive income every week for years.
I leave it on my desk at home and friends come and play with 5p pieces in the hope of winning up to a £1 jackpot. It's just left there with it's lights flashing to encourage people to have a go!
Although it will not make me wealthy, the passive income concept is still sound. It 'earns' me money without having to work for it. OK we had to design and build it first, but there is little maintenance and it provides a tiny income!
The idea of scalability is an important one. We should not put all our eggs in one basket and spend all our time getting our one source of passive income to be the biggest.
Lots of little passive income streams can be made by providing useful information for those hungry for it. Don't just concentrate on one idea or area. When you have set up your main website, do another one on a completely different subject and preferably one you know something about.
Wouldn't we all love to have lots of passive income coming our way? The Holy Grail is to have lots of little income streams from various sources, all flowing in to make your 'river' of income.
If you can make these both online and offline, then all the better. The more the merrier.
Don't ignore little bits of income you might get from one of your websites through say Google AdSense. It's the little bits of income that add up over time to be a lot!
Buying businesses in Cashflow really gets you racing! They begin to produce high cashflow or passive income and quickly enable you to get out of thr 'Rat Race' and on to the 'Fast Track'.
Cashflow Game Part 5 - Businesses
The cashflow figures are bigger than the small deal cards and they really begin to stack up, as you feel you are becoming more and more successful!
Somebody asked me today what the term 'Financial Freedom' really means. The trouble is that it's a bit difficult to define, because we are all different and want different things.
