This is from Lance Edwards:

Financial Freedom vs. Wealth Creation

I presume that you entered or became interested in real estate because you heard that it could improve you and/or your family’s financial condition. Well, it absolutely can. And just like you, that’s why I entered real estate.

More millionaires have been created with real estate than any other type of investment.

But let me bust a myth right here. Financial freedom is not about having $1 million in the bank. Yes, that works but it can take a very long time. Let me explain.

There are 3 components to fianancial freedom and wealth creation:

1) Active Income – this is where we exchange our activity for income. It’s hours for dollars. It can be very good paying but nevertheless, it is a job. Real estate wholesaling is active income – and can pay well but it is still a job. Don’t work and you don’t get paid.

2) Passive Income – this is income derived from our assets. The income comes in whether we show up or not. It is does not require our active involvement on a daily (or perhaps any) basis. A key real estate example is income property – like apartments (my favorite).

3) Net Worth – this is equity in our assets. It is our balance sheet. It is the equity in our real estate. But there’s a key definition about assets… An asset is only an asset if it produces passive income. (The equity in you home is not an asset).

Here’s where the NEW strategy for financial freedom becomes important.

In school, I was taught that the path to financial freedom was 1) work hard; 2) get good grades; 3) get a good job so 4) I can stash away my savings for 30-40 years and live off of the interest. That works – as long as we live long enough and stash away enough savings; especially in the early years.

Bascially, the old school formula says: Work for 30-40 years generating Active Income; save a portion to create Net Worth – and then live off of the Passive Income, i.e. the 30 Year Plan.

Again that works but there is a much, much easier and faster way…

It starts with the new definition of financial freedom.

DEFINITION: Finanical freedom is when our passive income is more than enough to pay for our desired lifestyle.

Note that the definition says nothing about how much money you have in the bank. If your desired lifestyle is $6000 per month, you just need passive income of $6000 per month or more to be financially free.

The strategy to finanical freedom is that you build or buy Passive Income vehicles (using other people’s money) so that your Passive Income exceeds the costs of your desired lifestyle. And THEN you are FREE to create your Net Worth.

You see, it’s faster and easier to become financially free than it is to become wealthy.

Wealth creation and savings can take decades. Financial freedom can be done in 1 apartment deal – it can certainly be done in a few years.

This outlook changed my entire strategy to real estate and business.

KEY TAKEAWAY: Buy or build passive income vehicles (using other people’s money). I call it Nothing Down Financial Freedom (TM).

Lance