Friday, May 30, 2008

Financial Freedom Formula

Last weekend, I went for a seminar - "Millionaire Mind" by T. Harv Eker who wrote a book called "Secrets of the Millionaire Mind". The seminar was conducted in 3 days: 23rd & 24th - 9 a.m. ~ 11 p.m., and 25th - 9 a.m. ~ 8 p.m., and it had attracted about 4500 people who came from few countries - Malaysia, Indonesia, Singapore, Taiwan, Japan, Vietnam and etc. to listen this seminar in Mines Conventional Hall.

In the seminar, he taught us how to change our Money Blueprint. In the changing process, we have learnt Financial Freedom Formula (FFF) - which dealing with money management and techniques to control your mind (from my oppinion the techniques that he proposed are related in NLP, attraction law and subconscious mind).

Financial freedom is defined as the ability to live the lifestyle we desire without having to work, or rely on anyone else for money. And it has formulated an equation as follows:

FFF = WI + Savings + Investments + PI + Simplify

WI = Working Income = permanent job's income
PI = Passive Income = income without work
Simplify = make life simple with only buy the necessities things

In this equation, the only thing that really make us truly financially free is only when our passive income greater than our expanses. To increase the passive income, we have to increase two primary sources of passive income:

(a) Investment income (money working for us)

(b)
Ongoing passive business income (business working for us)

The examples of passive business income are Franchiser, Network Marketing, Royalty, Internet Marketing, and etc.. Thus, the secret is to have multiple stream of passive income.

Apart from that, we also have to be good at managing our money. Eker said "Wealthy people are not any smarter, they just have better money management habits". I'm strongly agree with him that we have to train ourself have the habits to manage our money even we only have RM 100 to be managed. The simplist and easiest money management method is seperating our income into different accounts for specific purposes.

The income is divided into 6 accounts:
  1. 10% for Financial Freedom Account (FFA)
  2. 10% for Long Term Savings for Spending (LTSS) Account
  3. 10% for Education (EDUC) Account
  4. 55% for Necessities (NEC) Account
  5. 10% for Play Account
  6. 5% for Give Account
Of course, the distribution of percentage can be varied as we like.

FFA is used for investment and not spend for other purpose. The concept behind is to create a golden goose (savings) and make them produce golden eggs (passive income). Then, when we stop working, we get to spend the eggs and not the golden goose.

LTSS account is used for buying new car, house that we have to take longer time to save a big amount of money.

EDUC account is used for our own education and not for our children like now I'm paying RM240 for this seminar. hehehe... This is true, if we are not growing, we are dying.

NEC account is used for paying bills, house goods, all types of loans and etc.. If we can't live on 55%, then we have to simplify our life as stated in FFF. "Wealthy people think long term. Poor people think short term."

Life still need to go on, so, Play account is used for us to spend on the things that we desire to do. It is like once a month spend on good foods or spend on vocation after save for 3 to 4 months.

Give account is used for someone that needs people to help like donation as how chinese said "small money does not give out, big money would not come back". :)

I hope my short sharing (hehehe...i'm not sure is it short for you or not) will benefit you all to get financial freedom. Anyway, we have to remember

"Habit is more important than mouth" by T. H. Eker

thus, let starts take action now to have a habit to manage your money instead just talk, and hope we all truly get financial free and stay happily with our family.

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