When we complete our studies in school, we look for a job which gives us a monthly salary. Each year, based on performance or gratuity, we get an increment to our salary. This trend carries on as we proceed to our mid-career life. We spend part of our pay on necessities, bills, some on personal entertainment and save the remainder of it. High salaried employees like bankers and lawyers may earn at least half a million dollars a year. Thus buying luxury items like sports cars or indulging in high life are no big deal to them. The more we earn, the more we would spend. But if we lose our job, we will lose all the capability in spending. It means to say, our lifestyle is very dependent on our income. Welcome to the Rat Race society.
What is to be financial free? Financial free is a lifestyle you have created such that your passive income is enough to cover your daily expenses and lifestyle. Passive income is an income that you do not have to actively work for it, like a job. To be financial free does not necessarily mean you have to be very rich. It is with respect to how much you have to spend to support your lifestyle. If you live a simple life in prairie house and live on some vegetables and chickens you plant and rear, you don't need any money to spend and you don't need income. Hence you are financially free. On the other hand, if you have a family to feed or a lifestlye to enjoy, you would then need a stable income to support your expenses. If this income is passively earned and is able to support your lifestyle, it means you are financially free. You are out of the rate race.
Examples of passive income are dividends payout from investments in equities, or owning a business which constantly brings in healthy profits.
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