In my previous post, I explained that to have financial freedom is to match your passive income with your expenses.
However, it’s important to remember that often, this is not sufficient.
Why?
Well, imagine if you have $10,000 per month of passive income and $10,000 per month of expenses. Yes, this is financial freedom. You are now able to retire comfortably, spending time with your family and doing the things you love most. You no longer have to work for money. You let money work for you.
However, having passive income level that EXCEEDS (not only match) your expenses do have its own merits.
For example, $15,000 passive income versus $10,000 expenses.
The $5,000 leftover per month can now be used to further expand your asset base, thus increasing your passive income even further.
Now, you can enjoy your lifestyle even more and can perhaps give back more to your community.
Another issue you might want to consider on why it is important to increase your passive income as time goes by is because of inflation. I forgot to address this issue earlier. Thanks to one of my readers for reminding me.
When it comes to inflation, $1 this year will not buy you the same thing next year. The purchasing power of $1 received this year will erode as the year goes by (of course, this is if the economy is in the state of inflation, not deflation).
You might want to refer to my previous entry on inflation.
Thus, I think it is important to have some significant left overs from our passive income not only for the purpose of expanding our asset base, which then could increase our passive income further, but also to track inflation.
Till next entry..
