What exactly is financial freedom? We hear the term all the time, but what does it actually look like?
I guess, when we think of financial freedom, we think of not having to worry about expenses. Not stressing about bills. If you’ve ever been in a place in life where you had to live paycheck to paycheck (or you’re in that situation right now), you may just think of financial freedom as the end of that paycheck to paycheck lifestyle. Having more breathing room. Not fighting just to survive. Maybe having the money to buy the things you want.
I’m going to throw this out there – becoming financially free has to start with building wealth, but the Beauty of financial freedom isn’t in having the money, it’s in the freedom of getting to choose how your time is spent. Wealth without freedom is worthless.
Author and entrepreneur Robert Kiyosaki has written popular books about this, like Rich Dad, Poor Dad, and The Business of the 21st Century. And while I can’t say I agree with everything he’s written, he describes true financial freedom PERFECTLY. It has nothing to do with how much money you’re making. Absolutely nothing. It has everything to do with how your money is coming in. Does the cash flow TAKE your time, or does it give your time BACK to you?
This is why the only thing that’s truly financially freeing is residual income. Understand residual income, and you’ve got the keys to the gates that lead to actual, legitimate financial freedom. Financial freedom and residual income aren’t just cousins that get along. They’re not just a pair of friends with some things in common. Financial freedom and residual income are bedmates. They’re lovers. They’re incomplete without each other. When I wake up in the morning next to my wife, covered in 2 loudly purring, fluffy cats, I know that there’s no one else in the world better for me. That’s how closely financial freedom and residual income need to be in your mindset – unified, married, glued together, whatever you want to call it, if they’re separate you’re doing it wrong.
So What Is Residual Income, and How Does It Work?
Again, Robert Kiyosaki summed this up pretty perfectly. The difference between a regular income source, and residual income, is similar to how different water faucets work. Do you know those super annoying water faucets in bathrooms that constantly turn off on you, automatically? You have to hold the lever down to keep the water running, and the second you stop holding the lever, the water shuts off. Kiyosaki compared that to a regular income source. When you’re an employee working for someone else, or even if you’re self employed but you have to keep working to keep the money coming in, THAT’S a regular non-residual income flow.
And that’s still slavery. Your time is still not your own, because you’re forced to always keep giving up your time in order to keep the money flowing in. Whether you’re an entry level employee punching a time-clock, or a private practicing doctor making $300,000 per year, as soon as you stop pouring your time into the grind, what happens? The money stops flowing.
Residual income is the opposite. It’s a long-term investment that’s designed to make you MORE free, not less. In the corporate world, the more money you make, the more you have to sell your soul to the company. If you want more money, you have to become more of a slave. It’s reversed with residual income. Residual income continues to pay you on work that you did months ago. Years ago. Decades ago. It’s the faucet that keeps running on its own. You could completely stop working, go for a bike ride every day of the week, or put your feet up and binge watch Netflix, and still be bringing in money like everyone else that’s selling their life away for it.
It’s essentially the most effective way to retire young that exists.
So How Do You Make Residual Income?
There are actually a bunch of ways of making residual income. None of them are easy, but all of them are worth it. These are some of my suggestions, and I’ve done almost all of these myself.
1. Selling insurance. Most people think of insurance as the only thing more boring than accounting. And they’re not entirely wrong. But what many people don’t realize is that insurance will pay residuals. You’re essentially selling a subscription service, so every time you sell an insurance policy, the person continues paying for it month after month, year after year. And you continue getting paid for the sale.
Get licensed to sell home and car insurance. It’s the easiest to sell (because everyone has to have it), and you can just do it part time. As an independent agent, getting paid around $150 to $300 for each sale, if you can manage to sell 2 policies a week you’ll make between $15,600 and $31,000. But here’s the thing, the next year you get paid that money again, doing absolutely no work. Every year that you sell policies, your flow of residual income will keep compounding on itself again, and again, and again. I have a couple of friends that make over $100,000 a year before they work… in other words, if they choose to not work a day for the entirety of the year, they’ll still bring in 6 figures, because it’s piled up from past years of hustling.
2. Renting out properties can work out in much the same way. A lot of people love to tell horror stories about how hard it is to be a landlord. Like most worthwhile things, it can come with its set of challenges, but by investing in properties early in life (instead of spending all of your spare cash on indulging), you can gradually build up a few leased properties that will keep flows of passive money coming into your back account long, long after the properties have been paid off.
I also have friends and acquaintances who have been very successful in this, and several of them even make 7 figure incomes, and spend the vast majority of their time doing whatever the heck they want. Like every other form of residual income, though, it takes a lot of time, and consistent effort to get the whole process launched.
3. Marketing through a blog. Hear me out on this one. Writing a blog may not be something you’ve ever considered, or something that you think you’d ever want to do. I know I never wanted to until I discovered the opportunity it held for creating a passive form of income. I used a program called Wealthy Affiliate, which was cheap and easy to use, that helped me create a blog where I share my knowledge in certain topics with people that are seeking information.
The thing is, Wealthy Affiliate taught me how to get those posts that I was writing onto the first page of Google, and then how to promote things to my readers through them. Using affiliate marketing to recommend products to a blog readership is not just lucrative, it’s also INSANELY passive once you’ve got it off the ground. Building a readership, and getting those first page rankings is challenging, and it takes time and a lot of consistency. But by using the right strategies you’ll eventually start to land one 1st page ranking after another. If you need some details on how affiliate marketing works, here’s a post you may find helpful!
Here’s why that’s such a beautiful thing for residuals: when you have several dozen posts from your website sitting on the 1st page of Google, that means that the thousands and thousands of people searching those keywords will be landing on your website. Many bloggers with a decent number of readers make thousands and thousands of dollars every month, or even every couple of days, and this is happening passively. While you eat dinner, take a shower, play with your dog, jump into a pickup game of soccer with your friends, or even sleep, you’re still making money. Every hour of every day.
Eventually, your blog can become established to the point that every post is landing on a 1st page, and you can ultimately work 10 hour weeks or less, pumping out the occasional blog post, pinning them to Pinterest, responding to comments, and then moving on with your day.
And these are just a few methods I’ve found effective!
So If Residuals Are So Great, Why Doesn’t Everyone Choose Them?
So if residuals are so great, why isn’t everyone doing things that pay residuals? I’ve often been asked that about selling insurance, or affiliate marketing through a blog. Here’s the answer in a nutshell.
1. They take an enormous effort in the beginning, and 2. they NEVER have immediate pay offs.
That’s the reality. Less than 5% of people succeed in either affiliate marketing OR insurance sales (most people don’t even last beyond their first year). The idea of making passive flows of money for the entirety of your life, working barely any hours, is extremely appealing. Everyone loves how that sounds. The problem is that most people also require instant gratification. This doesn’t work when you’re investing in something that pays residuals. You can struggle and work on repeat for months, or even years, before things start paying off.
Many hours and a lot of elbow grease has to go into laying the foundation. Whether you’re figuring out how to get clients for your insurance sales, saving up to purchase foreclosed houses, studying the housing market, fixing up old houses, building a website (which was mostly done FOR me by Wealthy Affiliate), slowly growing a social media following… the list goes on and on. Residual income success does not happen overnight.
That’s why not everyone does it.
It Boils Down To This
Do you want it or not? It’s not a matter of whether or not it’s possible. It’s possible. It’s not a matter of luck, nor does it require that you be some kind of genius, prodigy or guru.
It requires some small upfront investment of money, some time at the start, a lot of patience, and a lot of determination. I had no choice but to pursue residual income. Absolutely no choice. I look at every single day of my life as if it’s my entire life time. When you look back on your day… if it was your life, did you spend it how you wanted to spend it? Did you do what you loved, what made you feel the most alive, made the best use of your talents and potential? Did you get to touch other lives, experience other cultures, see new things?
I felt like my ability to do those things was too limited at a gray desk, in a gray office, spending 8 1/2 hours in front of a computer, doing tasks that didn’t light a single spark in my day.
I needed the time to practice piano, sing, dance, see the world with my wife, help my friends, make memories. I wanted to see animals in the wild that I had dreamed my whole life of seeing (I’ve been an animal lover since birth). The office job was strangely devoid of beautiful animals in their natural habitats.
My point is this: you can make it happen. What is financial freedom? It’s shaping your finances to make you free.
2 People reacted on this
Thank you kindly for sharing this rather thoughtful and thought-provoking article with us all. It is appreciated. I recently sold an online business that was earning a substantial income.
So why did I sell it?
I wasn’t running the business – it was running me! sure some of the luxuries were nice but here was no freedom..well as much freedom as 100hour+ weeks permits!.
I just wanted to put that out there to you that…we ought to not let our businesses run us!.
That’s a great point. Even being your own boss, a business can be just as consuming and enslaving as a job, or even more. It takes a lot of hustle and time to get one off the ground, and some kinds of businesses never relent.
Congratulations on the business sale!