5 Lessons I Learnt From Those Who Have Achieved Financial Freedom

Let’s be honest, all of us want to be rich. I started my financial journey many years back by finding out how the rich manage their money and how exactly I can do it like them. However, most probably, the information you’ve been finding is all directed at the super rich. How about common people like you and me? Are we able to have a little more money so we can not worry about it anymore?

Throughout the years, I’ve had the opportunity to meet and speak to people who have became financially free. Every time I talk to them, I learnt something new and truthfully, its not as complicated as we thought it would be. In this article, I will list down the lessons I learnt from my interactions with these individuals who have managed to get out of the rat race.

Lessons I Learnt From Those Who Have Achieved Financial Freedom

1. Financial freedom is not just about saving money

The first lesson I would bring out is that financial freedom is not just about saving money. Oh wait, do you mean I don’t need to save money? That is not true either. I’ve seen people who have achieve financial freedom as a single person, as a married person and even as a person with kids. When I look at their lifestyle, certainly it is not just about saving money.

Most of the time, we start off our financial journey frantically saving as much money as we can. However, in our younger days, we would realise it is very difficult to save money not because we spend too much but because we have limited income. As our income increases, we would find it easier to accumulate wealth. This brings me to my next point.

2. Low income is not easy to achieve financial freedom

Income is an important equation in financial freedom. To put it simply, if we earn $2000, saving $1000 is 50% of our salary. But if we earn $4000, saving $2000 is 50% of our salary. It is impossible to save $2000 with only a $2000 salary.

Therefore, it is important to focus on upgrading our skills to increase our income. When we are younger, we should focus on getting more experience so our value becomes greater and greater. If we are unable to go up the corporate ladder, there are many other ways to create more income through part time business and freelancing etc.

3. Cash must always be flowing

Another lesson I learnt is about cash flow. The reason why its called cash flow is because it must be flowing. In business, if cash flow stops, the business is in danger. This happened to several oil and gas companies who could not generate enough income to redeem back the bonds they issued out. In our personal lives, this is liken to having not enough income to sustain our lifestyle. This could be due to overwhelming debt because of poor financial management or just pure overspending. It could also be due to not enough income or not enough cash to sustain our life if we lose our jobs.

4. Make your money work for you as early as possible 

This point is about investments. When I speak to those who have achieved financial freedom, they would always say that I’m still young and its the best time to grow my money now. Then, when they talk about investments, its always not about the hot stock or the best tips but about the most boring and routine investments they keep doing over and over again.

The safer the investment, the better it is. That’s the wisdom I learnt. It can be so safe that they even recommend putting your money into CPF to get the 4% interest which is sort of guaranteed by the government. For stocks, we just have to buy low, get dividends and sell high. One strategy I’ve heard again and again is buying into stocks at an attractive valuation, selling partially when its at a fair price and then buying back again when it goes back down. This is like keeping a base of your capital in the stock and then trading around it over time.

5. Live off dividends and you’ve reached financial freedom

Many have stopped working because they realised they could survive on stock dividends alone. This is the path to financial freedom. We must know that achieving this is not by buying into the stocks in just a few days or a few months. In most cases, this takes many years to build, buying into opportunities when it comes. For example, some of them have stocks in their portfolio which they bought at such attractive price that the dividends they received have covered their initial cost and they are still getting dividends until now.

When crisis strikes, the dividends can be more than 10% when the stock price is very low. This happens for most Reits during a crisis. If the company survives the crisis, the price recovers and dividends increases as well. Its such a good investment that you won’t even have to sell the stock ever again.

Financial Freedom Is A Journey

There you go, 5 lessons I learnt from those who have achieved financial freedom. The last and final wisdom I would like to share is that financial freedom is a journey. It certainly takes time and patience to stick with what we have to do. We should never think of getting rich quick as it could land us into a much worse state than what we can imagine.

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