Why You Must Have Passive Income to Become Financially Free
Lots of people who have been given the wrong map think that to realize financial freedom they must go to college, get a good job, and work to make more and more money. They scrimp and save all their lives, faithfully invest in 401ks, and listen to the advice of financial planners who couldn’t possibly have their best interest at heart. In short, for some reason, they follow the advice of people who are not successful and who are not financially free.
The true definition of wealth has little to do with how much money you have in your bank account or the kind of car you drive. Lots of people make assumptions about people who appear wealthy, but who really couldn’t maintain their lifestyles for a month without touching the principle on their investments and in their savings accounts. True wealth comes from passive income in the form of dividends from stock market investments, interest on money in savings accounts, and cash flow from real estate investing.
Cash flow from real estate investing is the preferred route to financial freedom by so many financial experts because it is less risky that stock market “speculation”, provides higher returns than simply saving money, and with hard money lending, is easy to get into with little money and imperfect credit.
To be financially free, your passive income must meet and exceed all your bills. This means that you would have to be able to live off the cash flow from your rental property forever, without the need for corporate allowances. Considering that people getting started in Houston real estate investing typically buy property that cash flows $200 a month, this can seem like a daunting task. On this logic you would need 15 rental houses to cash flow $3,000 a month, a fairly conservative estimate of how much the average American needs to live on. However, if you take this information and apply it in small “chunks”, using your first property to pay off your car bill each month, and so on as you acquire more property- you’ll slowly be working toward financial independence.
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