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Financial Freedom- A guide to personal finance



Kirjoittanut: Digvijay Pawar - tiimistä Sointu.

Esseen tyyppi: Akateeminen essee / 3 esseepistettä.
Esseen arvioitu lukuaika on 6 minuuttia.

Abstract

Financial freedom is a trending topic in the young generation of entrepreneurs. This essay aims to understand and do a thorough research in how to achieve financial freedom, myths in finance and explore theories to understand cores of finance. By digvijay pawar and Rajdeep brar

 

CONTENTS

1 INTRODUCTION.. 5

2 Financial freedom.. 6

2.1   What is financial freedom.. 6

2.2   Fire theory for financial freedom.. 7

3 Main streams for achieving financial freedom.. 9

3.1   Content creation.. 9

3.1.1   Digital media platforms. 9

3.2   Investment 9

3.2.1   Digital assets. 10

3.2.2   Physical assets. 10

4 Myths of financial freedom.. 11

4.1   The overview.. 11

4.1.1   Mutual Funds. 11

4.1.2   High income to invest 11

5 DISCUSSION.. 13

REFERENCES.. 14

1 INTRODUCTION

 

Since this few years of digitalization things have been different on internet and so is the way of earning money. The books and methods from the past are no longer perfectly applicable in the world of business as they used to be. Now there are multiple sources of income, creativity is valued and more opportunities of earning than it was ever present. These new earning streams and digitalization is creating an opportunity for the new generation to be financially independent in an early age. Be it content creation, bitcoin, stocks and investments people are more aware of these opportunities and are willing to take the risk of choosing a different path unlike the previous generations.

 

This essay aims to use multiple financial theory and the book money master the game as a reference to understand the cores of finances and an insight to financial freedom in this day and age.

 

2     Financial Freedom

 

2.1  What is financial freedom

Financial freedom is a topic which is really important to understand to grow as an individual on a monetary aspect. Financial freedom is not just making or having a lot of money in the bank, instead it means that even when you are sleeping your money is working for you. In simple words the money starts working for you instead of you working for the money. As an individual you are not dependent on anyone and have time for yourself that is when you are truly financially independent. 

 

When it comes to being financially independent people mistake it to having a lot of money or high paying job. In reality it means that you are in a position of your life in which you do not have to worry about your money anymore and you have time for yourself out of your work life.

 

2.2  FIRE theory for financial freedom

 

The­­­­ Financial independence  retire early is a theory used for getting an early retirement. As we move to the era where the targeted retirement age is 40, FIRE theory comes handy. According to the theory, people devote themselves to saving 50 to 70% of their expenses (MintGenieteam,2023). Doing this they live a very minimalistic life and use their savings in different passive income sources. This increases their chances of getting an early retirement from their work life. Also, they continue to work full time and utilize a small time slot to invest.

 

The FIRE theory can be really useful to have money to invest in real estate, stocks, etc. If you are a part-time worker or full-time worker, you have to be very devoted to the FIRE method to achieve financial freedom. This is step one. ­­

 

3     Main streams of achieving financial freedom

 

After using the FIRE theory, you might have some savings which can be used to invest. Remember to save where you can but also never let it impact your health.

 

3.1  Content creation  

 

In 2023 the market size of the content creation industry was USD 30.34 billion in the world and it has been increasing since then (Polarismarketresearch, 2024). In today’s day and age with the help of the internet and different social media platforms it’s easier than ever to grab the viewers. Content consumption is on its peak and millions of people consume it on a regular basis.

 

Being a content creator can open multiple earning opportunities for you may  it be YouTube, Tik Tok, Instagram, Facebook etc. The only thing is to master the art of content creation which can be learned from videos present on the internet. 

 

3.1.1 Digital Media platforms

 

One of the big tech giants created YouTube which today has millions of people using it on a daily basis. Let’s assume that an individual starts making multiple tech review videos on YouTube with proper thumbnails, hashtags, communication, background and good video and audio quality. Doing this he slowly starts getting views and subscribers, as time passes now, he has a million subscribers.

 

What are income sources? 1) The individual will be paid by YouTube for creating content. 2) He gets multiple apps, software developers and tech companies sponsoring him to review their product in a good faith. 3) The popularity also comes in as one of the perks. For doing this it took a good camera, camera stand, some borrowed tech products and skills which are hard to master but here on he can make the videos in his own time and the views pay him even when he is asleep. The same goes with Tik Tok and Instagram, but it also takes a lot of creativity, ideas and time to make these content.

 

3.2  Investments  

 

3.2.1 Digital assets

 

Stocks can be a very good and easy way to invest money. Previously it was difficult to invest in stocks internationally or even domestically but now it has been made easier. An individual can invest in any company they want if it’s available in the market.  There are also multiple theories and videos available which can help in learning the skill of investing in stocks. There are also brokers who can help in investing and allocating the money.

 

Bitcoin and Crypto– Many would say that Bitcoin and other cryptos are unstable and cannot be trusted. But it is also true that a few days ago Bitcoin marked its highest value of all time which is more than 60,000 dollars (France24,2024). The Crypto market is really unpredictable and contains high risk but it’s also worth trying your luck. Finding these opportunities are very easy nowadays and buying a few of them and keeping it aside would not be a harm, it might pay off someday.

 

3.2.2 Physical assets

 

Traditionally to now, gold has always been trustable and has given an assured return on investment. Although it is expensive and difficult to protect from theft as it being a physical asset, its still one of the safest investments to make. It can be exchanged against a loan but it’s also that the money is not liquid hence it cannot be used in an emergency situation. 

 

Real estate- It is undoubtedly one of the safest investments to do as its value increases after sometime. It is also a bit unpredictable as its value may go down due to not being a prime space and it also has a depreciation rate attached to it with a high maintenance cost. The positive side is that it can be rented and some returns can be collected while also having a physical asset.

 

4     Myths of Financial Freedom

 

4.1  The overview

 There are multiple myths about finance and financial freedom and its difficult to mention them all. But there are a few topics which are addressed and might be helpful for a beginning. 

 

4.1.1 Mutual Funds

 

In the book Money Master the game, the author states that “96% of mutual funds fail” and more than 13 trillion has been invested in it (money master the game,2014,181). The author is trying to make us understand that the myth is brokers from mutual funds help us grow our money but in reality, we can earn more from the index in stocks rather than investing in mutual funds. Hence investing small in all 500 index is better than investing in mutual funds.

 

4.1.2 High income to invest

 

It is often believed that a high income source is needed to invest, which is not completely true. It is easier to invest if an individual has more money but it is also possible to invest by savings and living below your means. It is also not important to invest a lot of money at once, it’s better to invest slowly and slowly for the beginning.

 

5     DISCUSSION

 

Overall, I personally read a lot of theories, sources and books to understand the best suitable information for this topic. I wrote this essay as I personally decided to invest and manage my own money. In the beginning it was tough and the question in my mind was where to start from and then I started reading the book “money master the game”. While reading the book I also searched for different theories and platforms to invest and came up with multiple ways. I personally believe that this essay will give the reader at least some understanding and start saving and investing some money.

 

REFERENCES

 

MintGenieTeam.2023.Financial independence what is FIRE and how can you achieve it­­­­­­­­­­­­­­­­. Updated 06.11.2023. Read on 15.03.2024. https://www.livemint.com/money/personal-finance/financial-independence-what-is-fire-and-how-can-you-achieve-it-11699042689615.html.

 

PolarisMarketresearch.2024. Digital content creation market size, share and trends analysis report, by components software, hardware, services, and others by content format, by development, by enterprise size, by end-user, by region, and segment forecasts, 2024-2032. Updated 01.01.2024. Read on 15.03.2024.https://www.polarismarketresearch.com/industry-analysis/digital-content-creation-market

 

France 24.2024. Bitcoin tops $60,000, approaches all-time high. Updated 28.02.2024. Read on 15.03.2024. https://www.france24.com/en/live-news/20240228-bitcoin-tops-60-000-approaches-all-time-high

 

Robins, T. 2014. Money master the game. Book edition. New York: Simon & Schuster.

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