Assets, in a nut shell, are things that cause money to flow into your bank account. Your trading business, intellectual properties or treasury bill investments are assets because they earn you more money.
Liabilities, on the other hand, are things that cause money to flow away from your bank account. Expenses like rent, cutting your hair or monthly groceries are liabilities.
Financial freedom is therefore having more assets than liabilities without having to put in any extra effort.
Today, I broach the four classes of assets that can help become financially free.
1. Businesses: Facebook, Amazon, Google and Uber were businesses started by young people that eventually made their founders financially free. Starting the right business could do the same for you.
2. Investments: Stocks and bonds offer an avenue to compound returns and become financially free. If you have ever come across Tony Robbins’ story about a man named, Theodore Johnson, it is easy to grasp this idea. Mr. Johnson worked as a driver at UPS on a salary of $14,000 a year, yet when he retired, he was worth nearly $70 million. How? Compounding interest. According to the story, Mr. Johnson through the help of a friend began to apply a 20 percent tax on his income and then use it to buy inveatments. This worked for him and it can for you.
3. Real Estate: A long as there are people on earth. They are going to need affordable accomodation. Owning commercial property simply means that you get to earn an income when you let it out to renters.
4. Commodities: Commodities in today’s world are a store of intrinsic value. You can look at my post where I disntiguish between money and currency. Gold, silver, oil, soy bean and so on, are in great need in their raw or semi-processed states due to their industrial use. As long as companies need these commodities, there’ll always be a market.
Using any or more of these asset vehicles can take you to financial freedom. You just have to make up your mind to start small.