What is true financial freedom?

Property income can come from: rent; stock dividends; bond interest. An important concept in property income is: net cash inflow.

Some people may own a lot of properties, but the monthly rental income is not enough to cover the bank’s mortgage payments, and the cash flow is negative. Assets like this are a “liability” on the balance sheet, not an “asset” in the true sense. The same is true for shareholders of a company. If you don’t get dividends from the company every year, but just keep investing more, then this equity is likely to be a “liability.”

Many private entrepreneurs confuse “enterprise and family”, “assets and liabilities”, and manage the company’s finances and family’s finances together, mistaking “debts” for “assets”. If the company’s finances are in trouble, both the individual and the family will be ruined. Maintaining net cash flow from property income is actually a very important concept in investment and financial management. When an asset cannot bring you “net cash flow”, it is likely to be a “liability”. This is a financial proposition that is easier said than done.

3 Need to maintain a certain amount of net assets

If we want to give a quantitative concept to “financial freedom”, it is net wealth. For example, a concept often mentioned by asset managers is High Net Wealth Investors (HNWIs), that is, total assets – total liabilities ≥ 1 million US dollars. If we take into account China’s national conditions and the purchasing power of the RMB, a net asset of 3 million RMB in first-tier cities, 2 million RMB in second- and third-tier cities, and 1 million RMB in small towns can be included in the ranks of “high net asset investors”. This is the current level. If your goal is set in 20 years, taking into account the factor of inflation (2% per year), this quantitative standard should be: 4.46 million in first-tier cities; 2.97 million in second- and third-tier cities; 1.49 million in small towns.

4 Finally, keep a normal and free heart

How much assets does a person need to achieve spiritual freedom? This is a question that varies from person to person, and there is no standard answer. A truly “financially free person” should be someone who has both money and free time, and who maintains a normal free mind. Money does not necessarily make a person free; but without money, one is definitely not free. To achieve financial freedom, you must not only be physically committed to it, but also mentally committed to it.

The highest level of financial freedom

You don’t have to feel ashamed of being frugal in food and clothing, nor do you need to use a big belly to prove your wealth; you don’t have to show off your wealth to be respected, because your personality is already shining; your wealth is only for those you love and those who love you to live a comfortable (not luxurious) and dignified life.

In this way, wealth can enable you to achieve true spiritual freedom. This may be the true meaning of financial freedom.