How to achieve Financial Freedom before age 40?

 

Financial Freedom

There are many people who are in their 40s and still working. They have a family to look after, they want to continue earning money, but they also want more freedom. The question is how can these people achieve financial freedom? This blog post will discuss the steps that need to be taken for this goal.


In this article, we will learn how to achieve financial freedom by generating income from the stock market. I can bet that you will learn something new from this guide.


Achieve Financial Freedom by Generating Income from Stock Market

Anne Shiber was born in 1893 in the USA. At that time, there was racism in the USA, i.e., there were no rights for both black people and women. Although she got a job in the income tax department, she didn't get a promotion despite hard work. Even though she was hardworking, she still didn't have the opportunity to earn more than $3,000 yearly from her regular day job at the income tax department. Since she was working in the income tax department, she had a lot of information on how rich people live. This is what we will teach you through this article.

There was no trend of mutual funds and index funds in the USA; therefore, there was no pension plan for employees. At the time of retirement, at the age of fifty-age, she had not much money. According to a study, she had saved around $10,000 at the time of retirement. But at the time of her death, at the age of 101 years, she had a net worth of $22 million. The media was shocked by her net worth.

After research, it was found that she earned $22 million by investing in stocks which she started from five thousand dollars after retirement.

When she read the tax report of rich people, she learned that they are investing in cash flow assets like real estate, property, and some stocks. From these cash flow assets, they were getting passive income without working. Rich people hold their cash flow-producing purchases long-term and let them compound and enjoy their cash flow.

After complete research, it was clear that Anne Shiber was following a typical income strategy or by and hold income strategy. In this, there was no trading, no fancy investment, no future, no commodities, but bought good quality stocks and used to spend only the dividend on these stocks. However, she used to reinvest the rest of the money. This means that she was not only getting income but also growing her wealth.

If we calculate the rate at which her wealth grew from $10,000 to $22 million, you will be in great shock that the growth rate was somewhere between 16 to 18 percent. It means that after ten years of her retirement, her portfolio must have grown from 30000 to 40000. But after the next ten years, her wealth must be between $200,000 to $300,000, while her dividend income must be around $8,000. As a result, she was earning her original investment amount through passive income.

Furthermore, after ten more years, in 1974, her portfolio must be between $1.4 million to $1.6 million. Consequently, in 1984 her wealth rose from $4 million to $6 million. Therefore, at the time of her death in 1994, her net worth was $22 million which she chose to donate this money. But still, she didn't receive any tax on this income according to USA tax law.

With this example, we hinted at how rich people become more rich day by day without working.

Now you must be thinking about the purpose of becoming rich at old age when you have the energy to spend it well. She started her investment at the age of fifty-one, but if she had started investment at an early age, then she would have been among one of the world's most prominent investors. But the problem is she had no idea of investment at an early age.

What we learn from this factual story is that “if you are brilliant, then nothing matters." The only matter is what's in your mind. It's never too late to start. You can achieve financial freedom in your 30s if you start investing in your 20s. Consider your future as your third child. This means that the money you invest in your child, invest in your future retirement funds. If you keep doing this for fifteen years, then no matter if your two kids financially support you in the future or not but your third child, i.e., future retirement funds, will help you.

Moreover, if you invest that money for passive income, you can support your two kids through compounding. That's why if you invest in equities, then you should wait for few years to get the best results. Generally, the salary grows at the rate of 5 to 8 percent, which is only possible if you have a job, and you are healthy and fit at the same time.

However, in the case of passive income, your income grows at the rate of 16 percent without working.

Investment is Much Easier:

In today's world of high pace technology, it is hell easy to invest in stock. In the past, it was necessary to contact a broker to invest in each share. People were bound to pay some commission fee, but today you can support by staying at home. If you do not know investment, you can start by investing in mutual funds and index funds.

Conclusion:

You can start investing your money today, even if you only have a few dollars. The sooner you begin investing in stocks or other assets that are likely to increase in value over time, the more wealth you'll be able to build up for retirement. Check out our blog post on how compounding works in stock investing and get started building your nest egg now!


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