Fast Track Your Financial Journey
I decided to write a post on this because I almost commit this mistake, you could potentially postponed your freedom by years. Recently, me and my fiancee decided to start looking at getting our first property together. We saw a few flats that we like and the below are the prices of 2 flats that I drew out for illustration purposes.
Initially we wanted to get the flat at $350,000 but somehow or another, we got tempted by a much bigger flat that is selling at $480,000. Both work out to be within our budget, and we shared with my family to get their inputs. Majority of them told us to go for the $480,000 flat due to the size and every month work out to be additional of only about $300.
We almost got tempted into getting it until I asked myself 1 very important question. What is the real purpose of this property. Is it for investment or is it for our own stay. If this property is meant to be for our own stay, we will be getting a much larger liability every month by getting the $480,000 flat. Some might say that the potential capital appreciation of the bigger flat is more but again, it boils down to the main intent of getting this property.
Why am I sharing this? This is an important topic because many of us will commit this mistake without us knowing it ourselves. By paying an additional sum of $300 every month, it also meant that we have lesser money to invest into other assets, things that could bring me positive cash flow every month. This is specially important as we are now in our first phase of building wealth, which is why it is crucial to ensure that we watch every expenses and reduce all unnecessary spending to ensure that our wealth bucket gets filled up faster.
Knowing the difference between asset and liability is easy but understanding it and doing it is not as easy as it seem. You have to be determined and not succumbed to peer pressure or any external pressure that is telling you to follow with the herd.
As you can see from the picture above, financial freedom is like having water in your bucket at any point of time even without you filling it up. This is what we call passive income. To ensure that you can achieve financial freedom at a much faster pace, you have to constantly ensure that your liabilities is smaller than your asset and your asset must be growing at a much faster pace than your liabilities, only then will you achieve financial freedom.
