financial freedom definition

Define: Financial freedom

Financial freedom is a stage when you collect a sufficient amount of money for your future and create a source of passive income which is working for you. The amount for financial freedom may be different for different people. Basically it depends upon your daily expenses and monthly charges. Some people achieve this at a very early age, some achieve it when they are adults, some achieve this at 70’s or 80’s. In many cases due to unplanned budgets and investment people do not achieve financial freedom throughout their life. For financial freedom many people invest their money in mutual funds, PPF and fixed deposits also.

Why do we need financial freedom?

Many people want to achieve financial freedom in their life. But only a few of them are able to achieve this goal. But first of all let's think about why we need financial freedom? The answer is simple: we want financial freedom so that we can spend our time with family and complete our wish dreams like writing, photography, reading etc. many people want financial freedom for earning more money by doing some other business. Financial freedom can be achieved by investing the money in a systematic manner so that at the end you will get a sufficient amount in old age and you happily spend your rest of the life.

Active income and Passive income 

Active income is income which is generated by present work. It may come through a job, business or any other present source of income. Many people do overtime for the active income. While passive income is a source of income in which we do not need to do any effort. For example, working in a college as a professor and the money you get from this profession is an active income while when you are investing your small portion of this money in share market to generate some more earnings this income is known as your passive income. 

Why do we need passive income?

Now we completely understand what a passive income is? But really we want a source of passive income in our life. The answer is yes. Let's take an example: a person that works and earns a sufficient amount of money daily. It is good for their present situation. But what happened in case of a medical emergency in his life. If he is not able to attend the job then how he manages to get money for his family to run their daily expenses. In this situation only a source of passive income can save your family.

Also read: Everything about Indian Stock Market

Ways to create Passive income 

There are many ways to generate passive income depending on your skills, capital, and risk tolerance. Some of the ways to generate passive income are:

1. Investment-Based Passive Income:

Requires upfront capital but minimal ongoing effort. Some of the ways are:-

• Dividend Stocks – Invest in companies that pay regular dividends so that you maintain regular passing income.
• Real Estate Rentals –invest your money by buying property and renting it out.
• Bonds or Bond Funds – It is the Steady income from interest.

2. Digital Assets:

It may often require time upfront to create, then earn passively.

• Write an eBook – Sell it on Amazon or your own site.
• Create an Online Course – Platforms like teaching courses, chat GPT courses, AI courses etc.
• YouTube Channel – Ad revenue, sponsorships, and affiliate marketing.
• Stock Photography or Video – Upload to sites like Shutterstock or Adobe Stock.
• Mobile Apps or Software – Create and sell or offer freemium options.

3. Business & Automation

Build systems that generate revenue with minimal daily involvement.

• Dropshipping or eCommerce – Automated fulfillment services can make this semi-passive.
• Affiliate Marketing – Create content that drives sales to other people's products.
• Print-on-Demand – Design shirts, mugs, or merch sold via platforms like Redbubble or Teespring.
• Vending Machines or ATMs – Requires maintenance, but is largely passive once set up.

4. Financial Instruments & Banking

Earnings from interest or yields.

• High-Yield Savings Accounts – it may have low return, but also it contains very low risk.

5. Intellectual Property:

Earn royalties from your creations.

• Music or Art Licensing – Earn when your content is used commercially.
• Patents or Trademarks – License them to others for recurring income.

Which is the best investment or skills? 

Many people think that if they get a job and they start to earn money they should start saving or investing that money. But this is the wrong way to increase your money. We should never firstly think about investing money in FD or mutual funds. First of all we should invest money on our own skills. So that our active income increases and then starts investing in money in mutual funds, shares or Bonds etc. these skills will help you to generate your active income effectively.

Also read: Best Investment plans

Invest in future protection of your family 

For the future protection of your family you should take insurance. There are many types of insurance like health insurance, Life insurance, education support insurance, assets insurance etc. These insurance protects your family in case of emergency. Choosing the best and right insurance is also very important. Before taking any insurance you should take advice from your agent so that you will get a right back up plan.

Creating jobs for other 

When a person thinks for both active as well as Passive sources of income, in this case he is actually helping in generating jobs for the other. These types of steps help to generate many different types of jobs. For example if we start a YouTube channel we need a cameraman, content writer, actors etc. . Another example is if we start a restaurant we need a manager and working staff.

Conclusion 

In today's modern world financial freedom is very difficult to achieve for a common person. Every person wants and tries his best to complete this task. But the reality is that very few of them are able to achieve this goal. But we should never be depressed from this. We should try until we achieve it.