Five Steps To Financial Freedom Step 1 – Boost Your Active Income

Financial Freedom has been the latest buzzword recently. Everybody is talking about it. Open up the newspaper and you will at least 3-5 advertisements a day teaching you how to achieve Financial Freedom through some kind of investment, whether be it in your career or getting a higher education degree. Well, what is financial freedom and do those advertisements really deliver Financial Freedom to you? For me, I define Financial Freedom in a very simple way; basically, you have enough Passive Income to pay for your basic expenses, so that you have time to do what you really want to do it life.

Achieving Financial Freedom is not that hard really; it just takes 5 simple steps.

Step 1 – Boost your Active Income

Step 2 – Get Rid of Unnecessary Debt

Step 3 – Save More

Step 4 – Reduce Spending and Live Within Your Means

Step 5 – Invest For Passive Income

The problems with a lot of those advertisements are they just focus on Step 5. There are all kinds of gurus which teach you how to invest In Stocks, Properties, Trade Stocks, Options to become a multi-millionaire. Wow! That’s assuming everybody has already mastered Step 1 to Step 4!  If you have already mastered Step 4, you wouldn’t be paying few thousand dollars to attend a seminar! Wouldn’t that money be better spent investing In Passive Income? Alright, let’s get back to the 5 steps.

 

Step 1 – Boost your Active Income

Active Income is simply income you generate by trading your time and effort for money. For more on Active Income, read Passive Income vs. Active Income. The most basic Active Income everybody has is a job.  Assuming that you don’t have a wealthy family or a huge amount of inheritance, all of us have to work for our money initially. Now, the key here is to maximize your Active Income. How do I do that? Here are a couple of suggestions.

Work Harder on Your Career and Continuously Upgrade Yourself

Figure out where your career is going and how you can further improve in the climb up the ladder. All Companies want individuals who are willing to step up and contribute without being asked to. Show the initiative and work hard to prove yourself to the Company that you are ready for higher responsibilities. By doing so, you will eventually get recognized and be promoted, raising your salary packages and more. It is also necessary to continue upgrading yourself, be in taking new courses, getting an MBA, getting a CFA, picking up books on the industry and management. Learning never ends.

Make Sure You Are Paid Top Dollar for Your Job

There are a lot of people who for some reason choose to settle for a job less than what they are capable of. Either that or they choose to accept a salary package which works out to be a lot less than market rate. If you fall into that category, chances are you are probably working too hard and not get paid enough. All of us who come out to a job market should expect to get paid at least market rate for our productivity, otherwise it’s doing injustice to oneself. One of the first ways to figure that out is to look for job surveys published by recruitment agencies and job classifieds such as Jobstreet.com. They normally have a pay scale varied by industry and position level. Make sure your pay scale is at least in the middle tier or top tier. If you are not, you should start looking for a new job. At the same time, give your current Company a chance to raise your salary package by having a heart to heart talk with your current boss. However, make sure you are a valuable employee first before having that talk; you should know your contribution to the firm very well.

Get a Job with a Variable Package as Opposed to Fixed Package

A well designed salary package is often based on variable factors as opposed to a fixed salary. A good management knows that by tying rewards to contributions, employees are well incentivized to work harder. Similarly, you can try to get a job with a variable package such as sales, work really hard every month and you will see your rewards very quickly in terms of higher commissions and so on. Even if you are a manager on a fixed salary, discuss with your employer to see if they can tweak the salary package to one which is of lower basic but higher overriding or profit shared incentive. So when your division does well by having good profits, you get a higher compensation package as well, making it a win win situation.

Get a Part Time Job

This is a very practical solution for the young people who have a 9-5 job and don’t work weekends. There are many options here, depending on your education level, skill level and age. It can be as simple as working part time in a restaurant, retail shop or so on. Some of the more lucrative part time jobs include Insurance Agent and Real Estate Agent. However, being in the insurance or real estate industry is not simple. They are usually commissioned based and may require a huge commitment in terms of time and effort. Another very popular part time job these days is the tuition teacher. Parents are obsessed with their kids’ education from a young age and are willing to pay any undergraduate a decent sum to tutor their kids.

Freelance with Your Skills

There are some skills which are very sellable in the freelancing market. Such skills include web design skills, photography, graphic design, interior design and so on. There are always jobs out there which prefer to look for a freelancer instead of a full service firm due to costs, flexibility and so on. Many jobs are usually based on referral, so it is very important to treat every job seriously and perform them with utmost responsibility. There are many designers who get so much business from freelancing that they eventually quit their jobs to focus on their own business.

Stay Tuned for Step 2 – Get Rid of Unneccessary Debt

 

For Further Reading, you may be interested in:

Five Steps To Financial Freedom Step 2 – Get Rid of Unnecessary Debt

Active Income vs Passive Income

My Journey To Financial Freedom

Personal Financial Statements – Accounting 101