Finance
Figure 1: Financial Freedom Plan
Your financial system is the most important key to the puzzle to unlock your financial freedom. Marketing is the lifeblood of your business and with great marketing you can make great money. However, without a handle on your finances you can still end up broke.
Your financial freedom system begins with having a financial freedom map.
Your financial system is made up of:
- Your financial map: Your financial system starts with a map
- Budget: Next the map is converted into numbers using what we call a budget
- AIS: Update your budget in your accounting information system for comparison with actual results. While your accounting information system does not have to be done on a computer, using a computer eases the process.
- Optimize: Develop processes and procedures around your financial system and optimize them overtime.
The steps to financial freedom are outlined in the map below:
Figure 2: Financial System
Business as a part of your financial freedom plan
The purpose of a business is to accumulate assets to produce future revenue. In determining your financial map you need to diversify where your financial freedom funds will come from. Your map should state what percent of your financial freedom funds will come from various assets. Some of your financial freedom funds might be allocated to real estate, some to paper funds and some to business. For instance my financial freedom plan consists of 70% from business, 20% from real estate and 10% from paper sources.
You attain financial freedom when your assets are able to generate enough income to meet your needs so you no longer have to work for a living. You work because you want to. You attain financial freedom from your business, when your business gets to the points where it has enough assets that generates enough income. For this to happen, your business should have developed to the point where it has enough assets encapsulated by systems that consistently churn out income. This happens at the level 5.
Level 1 entrepreneurs attain majority of their income from transactions with customers. This plan cannot support financial freedom. To become financial independent you must become a level 5 entrepreneur where assets with the right systems that consistently churn income.
This article is part 5 in the building financial freedom from your lifestyle business series