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Take the ultimate step in your life, what's your Financial Freedom Number!!

Article #3

6 Minutes Read! 
Read it repeatedly, this single article will give you complete insights on money management and how to achieve it.

I'm VJ and welcome you to this wonderful millionaire journey!!

A Quick Recap on Financial Freedom - 

Definition of Financial Freedom - Ability to live your life with your passive income or cash flow that you earn from your  assets (Investments and income from real estate, for example). At this point, you no longer need to do anything for money. You are officially becoming MASTER to MONEY!! 

Money says everyday to you - "How May I help You, Master?"

Benefits of Financial Freedom

  • Freedom and Flexibility - You get to decide how you work, who you work with, and how long you work for; you’re not at the mercy of employers and employment contracts.
  • Early Retirement - You can still go to work if you want to but you have option of retiring early.
  • Follow your Heart - You can pursue your passion which you were postponing.
  • More Time to your loved ones, best gift you can give to your family is your TIME.
  • Peace of mind - When your passive income exceeds your expenses, you will ask what do you mean by stress?
  • Make a difference in other people's life.

"Financial Freedom is Freedom from FEAR - Robert Kiyosaki"

How much do I need to achieve Financial Freedom - 

Your financial freedom number is how much money you need to earn to become financially free. In other words, this is your Magic Number.

When you don't know your magic number you are just like someone shooting at a target blindfolded.

Good news is we can quickly calculate your Financial Freedom Number now!

Let's do some calculations here-
Sum all your monthly requirements for the below basic necessities - 
Bills, Mortgage payments, credit card, household expenses, Education fees, Insurance, travel and fuel charges and all other loans.
Include your lifestyle and entertainment expenses to your necessities value. This varies according to your lifestyle.

Important point - We are not calculating how much you earn, we are just considering how much you spend. Hence if you spend lavishly and hastily, your freedom number is going to be BIG!!
Now you get a value - This is your monthly amount that you require for which you are living paycheck to paycheck, convert that to yearly amount, multiply that by 20 (this #20 is to mitigate inflation and taxes). This is your Freedom Number!! 

Example - You got $5,000 per month as the monthly expenses, yearly it is $60000 now when multiplied by 20 becomes $1,200,000. 

If you earn that income as passive income, you have achieved Financial Freedom. 
Congratulate yourself for calculating your Financial Freedom Number!!

How many people are shocked to see your numbers? Is it bullsh*t less or scaring high? Mention your thoughts in the comments.

Many people will be surprised to find that their number is far less than they had imagined. Remember, clarity is power. So, now that you know your number, lets get there faster.

How to achieve Financial Freedom - 

One core skill that is required to become financially free is MONEY MANAGEMENT.

What Poor and Middle class do - 
Once they get their salary, they start spending, spending and spending and wait for the month end to figure out if anything is left out. If some money is left, they will definitely NOT SAVE, again spend on it. Worst part, most of them end up borrowing for the day to day expenses.
This is the best plan to live broke. No worries, I was also one of you!!

What Rich do-
They too have a primary income either a job or business, big difference is how they manage their money.

There are many successful money management systems but I started to follow JAR system by T. Harv Ecker which I learned from Millionaire Mind Intensive course. 
(If you get a chance to attend Millionaire Mind Intensive course in your country, do attend, it will be a big game changer in your life)

You may be earning $ 10000, $5000 or may be less than $1000 per month as income but if you don't manage money now, you can't manage money when you have 1 million dollars.

Common misconception is people think - "I don't need to learn how to manage money now as I'm earning less. I may need to do it only when I earn way too much"

Universe never gonna give you 1 million dollars when you show that you can't even manage your current income.

JAR Money Management System This JAR system is simple, ultimate and true power to freedom. Let's take a look how it works -
Once you get your income, you allocate your money to different jars (either virtual or real jars), some people prefer to open separate bank accounts for each Jar, its up to you.

Financial Freedom Account Jar (Pay - 10%) 
Contribute minimum 10% of the income to this fund. The money in this account is like golden goose, this is going to give your freedom. Accumulate the money, invest and build a corpus and you are going to take only passive income that you generate from this fund. Never ever spend this amount. Important Jar, handle with care folks!!

Golden Rule - Never kill your Golden Goose, never touch your freedom fund money until it solves the real purpose.

Long Term Savings for Spending (LTSS) Jar(Pay - 10%)
This is like rainy day fund, contribute minimum 10% to this fund, this pays for any emergency, car breakdown, your vacation, the new LED Television you wanted to buy. You will invest this money too and multiply it.

Necessities Jar (Pay - 55%)
Unavoidable Jar, Contribute 55% to this fund, This pays your monthly expenses, bills, groceries, gym memberships and all your necessities in life. 

Poor and Middle Class people spend 90% of their money in the necessities and worry that they couldn't save any money. This is called living paycheck to paycheck.

Education Jar (Pay - 10%)
Spend this money to educate yourself. This is very much required, if you don't plan positive seeds in your garden called mind, remember, weeds will grow automatically. 

Invest in books, invest in courses, seminar, coaches, consultants that can help to grow in life.
Invest in your education, take a course on stock investing, buy kindle and read books, learn  yoga or meditation or whatever that can improve your life.

Golden Rule - Do you know the best investment that you can ever make is investment on yourself.

Play Jar (Pay - 10%)
My Favorite Jar. Your spirit need to have fun, you deserve that for all the hard work that you have done. If you postpone all your happiness for your future, you will eventually give up on your goals. You need to have fun, go to movie, treating yourself with food in best restaurants, going to massage parlor.
Important thing is you need to spend this jar on the same month.

Give Jar (Pay - 5%)
To show your gratitude, its very important to care for the people around us.
You can contribute money and if you really can't afford money, contribute time atleast and do volunteering.

Golden Rule - The percentage of the Jars are not important, whats important is the habit of allocating money.

Get into action, start managing your money right NOW. Buy any jar or use your different bank accounts for this. Whats important is cultivating this habit of managing money. I highly recommend to contribute to your Freedom Jar everyday, even a small amount also is fine. Afterall, we need to feed our golden goose everyday. 

Grow your savings to such a level where the interest from the investments will generate enough income to support your lifestyle without you having to work.

Accumulate your freedom fund with your savings and invest that money and use the advantage of compound interest. 
"You don't have to be GREAT to START, but you have to START to be GREAT- Zig Ziglar"

What is Compound Interest? 

Earning interest in interest along with principle, this is very powerful. It grows bigger and bigger when you give time to your investments.
To understand the compound interest, try this magic - 

You get two job offers, just a 30 day contract - 
One job offers you $1000 per day as salary, end of 30 day, you will make $30000 as income and another pays you $1 per day. Which offer will you accept? Million dollar question, obviously we accept first job. What if, the job two offers to double your salary every day?

If you straight away accept job one - pull your calculator and work out how much you will get in Job two.

Rest of them, Good Job!! Keep continuing.

Job One - got you $30000 in 30 days
Job Two - will make you multi-millionaire, you will get $536,870,912

In simple words, compound interest helps you to grow your money at a faster rate over time!!

This is the Power of Compounding!! 

Middle Class and Poor pays compound interest to their credit card and mortgage loans. 
Now calculate the mortgage loans and credit card loans that you pay for a long term, as it gets the advantage of compound interest, the money that we end up paying is VERY HUGE!! This is rightly explained by Albert Einstein as - 

"Compound Interest is the eighth wonder of the world, he who understands it, earns it, he who doesn't pays it"
 Now, you understood what is financial freedom, your freedom number and the power of compounding.

Is that all you need to know? No not yet. I recently read a book by Nagore Rumi - "You are your Fortunein which he quotes the following story - 

Once we were listening to our Master. 
 "You have borrowed a $1000 from someone. And you have promised to return the money in one month which is over today. Tomorrow he will come and ask you for the money. But you have no penny now. What will you do?, he asked us.

All of us gave a different answer. We will not appear before the lender. We will escape to some other place. We will explain the position to him and request him to give us some more time. We will confuse him by asking him, "Have we not settled the amount". Many such answers were put forth. But all the answers were contained the worry of how the amount will be repaid.

But can a loan be repaid by worry, Never. No problem could be solved, was ever solved, by worrying over it. Escapism also is no solution to the problem. It is just an adhoc arrangement, that's all.
Then, whats is the right answer, we asked our Master.

"Think that we will be able to repay the loan and also lend him money if he needs", he said.

His answer seemed absurd to me, but out of respect for him, I asked him a few questions that came to my mind- 
"What Master - we are penniless. When this is the case, how can we think that we will return the money and also lend him money if he needs? There seems to be no logic in your answer"

He looked at me meaningfully and smiled.
"Yes, you do not have even a single penny now. What else do you have now? You have nothing but a thought or worry in the form of a thought regarding repaying the loan, isn't it?
I am simply asking you to replace the thoughts with another, but a positive one. Why not try it and see"

Oh God! Golden Words! All that we have is a thought! and that too was of poverty. He asks us to change that thought with another of prosperity.

He has shown us the way to change the DNAs with poverty data to those of prosperity-data!

Isn't it the mind blowing stuff on changing the prosperity mindset? Let's rewire ourselves in the next articles.

Have a great weekend!!

With Love,
(Highly Excited for our journey!)

Your comments and thoughts are vitamins to me!! Pour your thoughts, suggestions and feedback in the comments section!!


VJ said…
Thank You Prakash
Unknown said…
Soooooper, keep going
srividya said…
Great insight about the jar. That is how my granny used to gift me with her savings in mustard jar. Thanks for reminding. And after calculating the financial score what shud I do??
VJ said…
Thank You, read forthcoming articles
Awesome insight towards money management....putforth in a beautiful way
Anonymous said…
Phenomenal blog with clear idea on money management...keep going
Sairam said…
Really awesome, explain real meaning of financial freedom and how to plan ..... This quick check proves I am in right direction... Thanks VJ
VJ said…
Thank You Sai, absolutely you are in right direction..
Unknown said…
Wonderful Insights on Money Management. Thanks VJ Anna
Unknown said…
Very clear explanation and very direct. Well done Vijay
VJ said…
Thank You shyam
zinmillions said…
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