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The Way to Financial Freedom Is A Three-Legged Stool

Financial independence is a state wherein you have sufficient wealth without having to work actively in order to meet your basic necessities. You are financially independent if your own assets or properties generate income greater than your expenses.  It does not matter how young or old you are or how much money you have or make. If you can generate money to meet your needs from sources other than your primary occupation, then you have achieved financial independence. You won't have to worry about money anymore, and you have much time doing other valuable things.

Financial planning is the tool that you need to get from where you are to the financial freedom that you desire. A balanced financial plan  is like a stool that has three legs, namely, (1) saving, (2) investing, and (3) insurance. If you try to remove one of the legs,  the stool will teeter unsteadily and may crash, taking you with it.

For start-ups, the legs of the stool are not so easy to put up. You have to build them one by one until the stool is stable.  The path of building the stool is from saving to investing to insurance. This is what I learned from reading financial books and lifelong learning program, and I am very eager to share this to you.   Let us first talk about saving.


Saving is putting away or storing money, or preventing waste of money so you can have much money for future use.  The first thing first is, you have to save in order for you to have something to invest in the future. The basic rule with regard to how to save your money is that you should put aside 10%-20% of your income until you have enough to cover 3-6 months of your expenses. The correct equation for saving is :


Every time you receive an income, you have to take away savings first, let us say 10% or 20%, and put it aside not to be moved. The remaining balance will cover all your expenses.

Saving is best achieved through a good budgeting program. Anyway, there's no getting around budgeting - it is a requirement for good money management. There's no need to have a negative attitude about budgeting. Don't think of it as a chore or a punishment. Neither think about it as a financial diet. It is simply a tool to increase your consciousness of how and where you spend your money. It is a guideline to help you spend your money on things that are most important to you. A budget is like a rudder of a ship; without it, we muddle through, unable to stay on course because we have no course charted and we have no tool for steering through the currents that constantly swirl around us. 


After you have save much money or you have excess money, you need to invest it so you can earn from it. This is what they call "you do not work for money but money works for you". This is the right thing to do because you should be the "master" of money instead of being its "slave". 

Investing is putting away money or time with the expectation of achieving a profit or a material result. Investing can take many forms. You can invest in a small business, stocks in the stock market, real estate, precious stones, bonds, money market funds, and many more to enumerate. Investing, in its simplest sense, is buying a thing with money with the hope of making a profit in return by selling it or utilizing it. If you buy for example a box of candy with the hope of making a profit by selling it in a small classroom, you are definitely investing - in a box of candy, the instrument or vehicle of your investment.

Investing is not spending or purchasing. You're not spending money frivolously, you're investing! Making money through investing requires researching and evaluating different kind of investments. The decisive test is whether there is a potential to turn a profit. The important word is "potential" because not every legitimate investment makes money.


If you are investing in a business, for example, you definitely need insurance. Insurance simply helps you protect your investments. Insurance is a tool that provides protection for any possible eventuality. You've worked hard to save money and invest, so you need to be sure that everything is protected. Accidents and disasters can and do happen, and if you aren’t adequately insured, it could leave you in financial ruin. You need insurance to protect your life, your ability to earn income, and to keep a roof over your head.


Statistics show that rich people are almost always conservative. They maintain low levels of debt. They save money, and they continue to look for ways to increase it while minimizing risk.  These should help you become rich and achieve financial freedom:

 (1) Develop and write a long-term plan.
(2) Save money and make a budget.
(3) Resolve to live debt-free.
(4) Reduce your expenses.
(5) Increase your income.
(6) Invest.
(7) Get insurance for your precious investments.

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