Sharpen Your Planning Axe: The Unbreakable Character of Financial Freedom - 3

After cutting each tree, I take a break. When I take a break, I sharpen my axe. With a sharp axe, I can cut more trees easily.

We saw in the previous section how important it is to invest in ourselves. We also saw that if we invest in ourselves, our active income will increase. It is very important to not stop this investment with ourselves but to make it available to our children as well.

Education is wealth..!

Everyone should realize that it is more important to invest in the skills of children than to give them property.

There is no harm in not enrolling them in college because they do not have money. But many people have an alternative opinion about spending money on skill development even if they have money.

When giving education to children, they should use it to create wealth. It is better to teach them to catch fish than to give them fish. Now let's see the main characteristic that must be followed to achieve financial independence.

How did the old man succeed?

The book "7 Habits of Highly Effective People" written by Stephen R. Kavi discusses in detail the seven important characteristics that every person should follow to succeed in life. The most important characteristic in that book is the habit of sharpening the axe.

 

There were two woodcutters in a village. One was young and strong. The other was old and thin. A competition was held to see which of the two could cut the most trees. Both the contestants were given the same axe. The one with a strong body cut down only four trees within the specified time.

On the contrary, the one with a thin appearance cut down seven trees within the specified time. Therefore, the one with a thin body won the competition. The winner was asked how he was able to cut down more trees. To this, he replied, "I rest for a while after cutting down each tree. When I rest, I sharpen my axe. I was able to cut down more trees easily with a sharp axe."

Therefore, the book says that the quality of planning and sharpening is very important to succeed in life. Therefore, everyone should sharpen your axe first.

"The false explanation of the meaning is the darkness and the number of times it is lost"

says Valluvar. This means that if one leaves the unquenchable lamp of wealth out of one's hands, one can easily go to the place of one's choice and chase away the suffering of darkness. One should take all the steps to earn such a special wealth in active and passive income.

Now we have looked at the various methods to increase active income in detail. Only by increasing active income can we earn passive income quickly. We should follow the above methods and take steps to increase active income. If we simply keep the active income thus earned, we will not get passive income. The secret to earning passive income is to invest the active income saved properly. There are various types of schemes to earn passive income by investing the active income we have earned in such a way. To invest in these schemes, one must first have a basic understanding of the scheme.

Calculation of the aggregate fund..!

We had said that the first step to achieving financial freedom should be to see how much money one will need as an aggregate fund. Accordingly, we had also seen that how much money one will need for monthly expenses including one's debt should be calculated based on inflation. Now let's look at how to do the calculation in a little more detail.

 

When calculating a person's income, his monthly salary, rental income, interest income, and dividend income from shares should be included. The net income after tax should be considered as the income of a person.

The total income earned in a year should be divided by 250. If weekends, holidays, and company-provided leaves are deducted in a month, then there are only 250 working days in a year. For example, if a person's net income is Rs. 10 lakhs, he earns Rs. 10,000,00 / 250 days = Rs. 4,000 per day. One should take steps to increase this income every year.

While calculating expenses following income, all expenses incurred every month, children's education expenses, loan installments, and annual pleasure trips should be included.

The amount that can be invested..!

If we subtract the total income from the expenses, we get the amount we can invest. The income should be more than the total expenses. If this difference is in the range of 20%-40%, it means that he is on the right track. This shows that he can achieve financial freedom soon. On the contrary, if the expenses are high, there will be a compulsion to take loans. People in that situation should explore ways to increase their income.