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Unless you wish to work yourself to death in old age, you should start to nurture and maintain your personal portfolio of wealth comprising savings and investments.

What would it take for you to earn more money from your job or business?

IF you are serious about attaining financial freedom, I have both good news and bad news for you.

First the bad news: It won’t be easy.

The good news: It is possible! And with guidance, it becomes probable!

A prerequisite for most of us who wish to move from a state of economic want to material abundance marked by financial freedom is to work very hard initially and very, very smart later.

Your hard and smart work will cause you to earn rising sums of active income year after year.

Some people feel guilty admitting they crave financial freedom. They are worried others will think they are cold-blooded and money-minded.

If you fall into that category, I would be the first to agree with you that money isn’t everything.

Family, love and health are just three of countless other facets of life far more important than money. Nonetheless money can buy us time, leisure and opportunities.

It buys us time with our families if we are able to retire early. It buys us leisure to pursue fun activities we enjoy and to go on holiday with those we love. And it buys us unparallelled opportunities to heal our ailments and to nurture our health.

Bottomline: Having money buys us choices. And having choices is a mark of a high quality life.

That’s why I always ask new clients of my financial planning practice whether “achieving financial freedom” is one of their key life goals. I then explain financial freedom is the happy state of having sufficient passive income to more than cover all regular expenses.

Our focus today is active income. Yet we must remember none of us will always be young and strong. Therefore, we should wisely channel a portion of our active income today to create streams of passive income tomorrow.

Passive income flows into our lives in the form of interest, dividends, distributions and rental that spin off from the capital we use to build our personal portfolios of wealth.

You see, unless you wish to work yourself to death in old age, you should start to nurture and maintain your personal portfolio of wealth comprising savings and investments.

I recommend you channel your capital into savings, vehicles like bank deposits and money market funds, and investments like bonds, equities, real estate and commodities.

But where does the needed seed capital come from?

I believe it stems from our utilisation of God-given but personally developed capacities to work hard and also to work smart to earn a living. We take those capabilities and plant them in the soil of our talents, strengths and knowledge.

Then as our active incomes — meaning our salaries or profit from businesses we operate — rise, we are faced with three destiny-defining choices:

Do we spend everything we earn OR spend more than we earn OR spend less than we earn? Here are three scenarios:

1 If we spend all we earn, our cash flow is balanced — we run up no surpluses or deficits.

2 If we spend more than we earn, we run up deficits.

3 And if we spend less than we earn, we generate surpluses.

The worst option is scenario 2. The first scenario is not wise but is way better than scenario number 2. The third scenario is best; it is how financially successful people live.

These successful individuals arrange their daily, weekly and monthly affairs to spend less than they earn. And when that happens, then as surely as day follows night, cash flow surpluses are generated.

When those surpluses are accumulated and then allocated into well-chosen savings and investments, the beginnings of economic success are birthed.

The arithmetic governing cash flow health is simple:

(Active income) minus (operational expenses plus regular debt repayments) = (cash flow surplus available for savings and wealth generation)

As you can see, there are three elements involved in calculating your monthly cash flow surplus: active income, operational expenses and regular debt repayments.

We will explore operational expenses next Sunday and regular debt repayments the Sunday after that. Our primary focus today, as mentioned, is beefing up active income.

So to strengthen your active income, I recommend you make it a permanent goal to improve yourself through ongoing lifelong education, formal or otherwise.

Also, more importantly, you should work harder and smarter than anyone else in your company or in your extended family.

Build a reputation for honesty, dependability, industry and creativity. Don’t be lazy and don’t procrastinate. Always aim to be the first person in the office each morning. And always, always ask for more — not less — work than your peers!

If you would do all that, over many years, your active income will rise in tandem with your career success. Then your prospects of becoming financially free over the ensuing 15 to 20 years will shift from impossible to probable!

Enjoy your journey to wealth

© 2016 Rajen Devadason

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