Financial Freedom:(Necessary Explanations )

Financial Freedom is not directly related to wealth, abundance, and prosperity. In this, there is a wrong interpretation. In reality, when the individual achieves Financial Freedom, he has a high probability of achieving economic wealth, “monetary abundance” and prosperity, but this is a consequence of the behavior of a larger series of variables and not only of Financial Freedom.

Table of Contents

The way to manage money for Financial Freedom.

In that sense, it is a consequence of the development of Financial Intelligence.

There will be people whose goals in life, or the way to face it with satisfaction, do not demand large amounts of money. And there will be those who think otherwise. In both cases, as long as money is not the fundamental limiting factor, Financial Freedom has been achieved.

Intelligence, and the consequent Financial Freedom, have become issues of important consideration. Not necessarily because they are a new concern, but rather because the dynamics of modern life make them a more sensitive topic than 30 or 50 years ago.

Financial Freedom has historically been considered an “art” or knowledge dominated by a few. This is how popular culture understands it. To the point that it frequently associates it with factors as diverse and strange as race, geography, climate, religion, or even the signs of the zodiac.

And understanding Financial Freedom is a pretty simple matter. While your practice, like many other things in life, is not.

Financial Freedom is a consequence of understanding the effectiveness and efficiency of managing money.

Efficiency is associated with the GENERATION of money and efficiency with its ADMINISTRATION.

The way to generate money to achieve Financial Freedom.-To develop Financial Intelligence, certain knowledge and attitudes are necessary.

Skills, abilities, aptitudes, experience, etc., are determinants as elements that QUALIFY the degree of intelligence or Financial Freedom, but they do NOT replace knowledge and attitudes.

KNOWING what Financial Freedom means is first and foremost. And for that, you don’t need any special attributes.

What additional knowledge is necessary?

First:

Money is a good that circulates freely in the market. It is transferred from one hand to another permanently and at a dizzying rate.

Second:

Money comes into your hands as the effect of SELLING something that people are willing to pay for. At that moment the money passes from one hand to another.

Third:

You cannot SELL anything that has not been PRODUCED first. Whether it is a physical asset or not.

Fourth:

If peculiar exceptions (chance, gifts, or something similar) are not considered, every PRODUCT constitutes the result of a process, that is, of a certain capacity to produce it.

The essential knowledge about money is summarized as follows:

It is necessary to have a certain production capacity to obtain a product that, when sold, allows money to flow from one hand to another.

The FOCUS of attention should not be money but PRODUCTION CAPACITY. There will be no money without the ability to produce something that can be sold on the market for a certain value.

There is only one factor that can be considered of the same value as production capacity: the possibility of SELLING what is produced. This is for an obvious reason. If something is not SOLD, it is not done, no matter how great a product it is.

The sale factor also plays an important role in determining the product to be developed. Since nothing will be produced that is calculated that can NOT be sold.

People’s production capacity is determined by SOMETHING they know how to do. As long as that SOMETHING is more or less valued in the market, there will be more or less movement of money.

The production capacity constitutes an Asset. This means that you can generate income at any time.

Contrary to popular belief, people do not depend on a job, a business, or a work contract to generate income to support the expenses of the life they have chosen. They depend on your production capacity. This is what allows you to get a job, develop a business or get a work contract.

Eventually, the job may end or the business fail. But the production capacity remains unscathed, and in this way provides the opportunity for everything to be started again, transformed, or optimized.

Financial Freedom is achieved by consolidating production capacity. This constitutes the investment and the fundamental work of the individual throughout his life.

There are, of course, many ways to build production capacity and understand how to develop it.

Generally, this is formed from the home. And it is the parents who take the initial responsibility to do so. In terms of their better judgment and ability, they define early school environments, early social relationships, and orientations about life and how to deal with it. This first job in building production capacity is of fundamental importance in people’s lives.

Parents naturally pass on values and belief systems that have guided their lives. They take care to avoid setbacks and regrets that have befallen them, and they try to make things turn out for their children better than they did for them.

This first “work” for the development of production capacity is not necessarily optimal, and it deserves that each person submits it to a deep, objective, and honest evaluation when they have the rationale to do so. The production capacity must be based on certain parameters that are not always known to the parents:

1. To achieve Financial Freedom, the production capacity has to BE DISTINGUISHED in the market.

If it does not have a distinctive value, it is difficult to obtain with it what is expected or needed.

2. The most appropriate way to develop a “distinguished” production capacity is to base oneself on gifts, inclinations, abilities, and potentialities that are different from those of other people.

ALL people have distinctive gifts. These natural dispositions are often ignored or considered irrelevant, however, they constitute the foundation on which production capacity must be developed.

3. There are many reasons why production capacity must take root in natural gifts or talents:

a) Starting from natural gifts and talents, it is easier to reach expertise.

b) Everything that is done WELL, or in any case better than others, produces greater satisfaction and contentment.

c) Contentment is the shortest route to satisfaction.

d) Satisfaction for what is done constitutes great energy for continuous effort, perseverance, overcoming obstacles, optimization, and comfortable transit through the routes that lead to excellence.

e) Energy allows the journey through life to be made by completing stages without stopping. Surpassing many who only achieve partial results. This energy distinguishes a person on the paths of life that always demand endurance rather than speed.

1. To properly sustain the production capacity, there must be the greatest possible social relationship, and the most homogeneous.

People must build, early on, a solid network of personal relationships. At an early age, when the responsibility falls on the parents, this may not be done appropriately.

2. There is essential “functional” knowledge that must be possessed in modern life, and possibly not considered in home education.

The most distinguished production capacity will not reach the course of Financial Freedom without certain knowledge and skills. The command of a language of universal use (English surely), the discretionary use of electronic devices, interpersonal communication, general culture, reading habits, willingness to investigate, etc.

Once the person can make full use of his rational faculties, he must evaluate all these elements and establish a COURT regarding the training he has received at home. None of the parameters that a good production capacity requires is difficult to obtain or unattainable.

Warren Buffet, the North American investor, holds a theory that it is appropriate to touch on at this point.

He says that in the world there is a kind of “belly lottery” that determines the conditions of “departure” of people on their journey through life. The buffet is aware that if he had been born into a family in central Africa, his fate would have been different. This is an element to consider in what it means to develop production capacity. The “belly lottery” clearly defines conditions in people. But in any case, it does not nullify the possibility of building production capacity. In the worst case, it limits it and makes the process more difficult and slow.

There will be people who are more likely to develop a high-quality production capacity in a short time. And others will have to invest more effort. The important thing is to understand, assume and face the process. Because in this way energy is generated that becomes self-sustaining over time.

Take the example of a person who, as a result of the “belly lottery”, did not have the best starting conditions, but would have finally fulfilled according to his available possibilities. Having passed this stage, the product of the first efforts can be reinvested to achieve consolidation and growth. Thus, at some point, the initial conditions are “transcended” and a competitive production capacity is established.

At this point, it is important to highlight the logic of INVESTMENT in what production capacity means.

If the individual is not clear from the beginning that to develop their production capacity it is necessary to INVEST, then they will reach mediocre levels and little distinction in the market.

In the production capacity, whole life is invested in what is available: time, money, effort. Only with an emphatic and permanent investment effort can the production capacity be a solid asset and grant Financial Freedom.

People who do not have precise knowledge of the logic behind Financial Freedom, invest in an “orthodox” way in their production capacity. To the education received at home, he adds school education, eventually a university, and little else. These people assume that personal education constitutes a cycle that must be fulfilled at a certain stage of life and the endpoint. This builds, of course, a limited production capacity that deteriorates over time.

On the other hand, this same group assumes that the “education” regarding their production capacity is mainly “technical”, and therefore linked to certain stages of life: school and university. This is a mistake. The production capacity does not only involve “technical” aspects, but rather a comprehensive education. Knowledge of oneself, of human nature, the dynamics that move the world, and “peripheral” skills (writing well, speaking correctly, relating advantageously to people, etc.).

People who guide their lives to achieve Financial Freedom, learn SOMETHING throughout their lives. They do not spare time or effort in their continuous education and the most diverse aspects.

Education is one thing and experiences are another. The latter is the process of accumulating knowledge over time, nobody wins it “in the laboratory or the classroom.” It is a function of time and the things that happen to people on their way through life and, of course, in the exercise of their production capacity. Experience enriches production capacity, but it is not a substitute for education. The first is given “anyway” (although how it is used is very important), but education must be fostered and stimulated.

Nor should education be confused with training or coaching. Training is the way to “deepen and expand” the knowledge, abilities, or skills that one has. It is a mechanic of “aggregation”, it adds something to what previously existed. An engineer can be trained in his technical skills or his functional knowledge. But this starts from a previously acquired level of knowledge and skills. Training is practice, habit, discipline, and improvement. Part of established knowledge and skills, work with and on them.

Education forms, nurtures, contribute, expands, sows, establishes, and builds. Education is comprehensive.

It has a holistic consideration of the factors and variables that define the formation of an individual. Nobody is trained or trained at home or in school and university education, they are educated there, they are trained.

The person interested in maintaining their current, competitive, and constantly valuing production capacity never stops educating themselves. And of course, training and training, but in that order.

With an honest evaluation, investing in continuing education costs nothing. And yet it provides a fundamental element to achieving Financial Freedom and competitive distinction in the market.

The reason why people do not do this methodically is that they make the mistake of considering that it is their job, a business, a contract, or a client that determines their income. They dedicate all the time and effort to them, diminishing their ability and energy to educate themselves continuously.

If they understood that employment, the business, and everything else is a consequence of the production capacity, the orientation would be different. And Financial Freedom would be achieved faster.

Production capacity is a matter of knowledge, education, development of gifts and talents. But the possibility of “trading” all this in the market depends on the ability to SELL IT to those who want and can pay its value.

And in the sales process, attitudes predominate over skills.

The most important attitude comes from understanding the value of one’s own production capacity. If you are not aware of the value of what you know how to do, no one else has to assign that value in a fair measure.

The person who knows the paths that lead to Financial Freedom NEVER delegates or transfers the assignment of value to others. It is he who determines, manages, and protects it. This is a matter of character. With an attitude consistent with oneself, the objectives, and professional identity.

The determination of the value should indeed be an objective and honest exercise so that it does not constitute a fleeting experience in the market, but everything else is a matter of character.

When the job does not respond to the comprehensive expectations of the value assigned to the “product” that it sells, the professional who understands Financial Freedom QUITS.

When the conditions of the employment or service contract do not conform to the parameters, it does not take it. On the other hand, he fully understands that an enterprise, no matter how proprietary it may be, is a vehicle to generate income and not a pattern or extension of itself.

All of these concepts are very important to Financial Freedom.

If you don’t give up a job that doesn’t meet your comprehensive value expectations, you lose freedom. And dependency passes from production capacity to employment and the employer. If there is no clear separation between the own Business and oneself, freedom is also lost. And the dependency leaves the coverage of the production capacity towards the Business.

The problem with this is that one day the employee may end or the Business fails. And if there is dependence on them, the person also fails.

Something similar happens with the accumulated money or the capital involved in some undertaking. If the person gravitates their Financial Freedom around that, they can lose it at the same time that they eventually lose that money.

For all this, zeal regarding the value assigned to production capacity is essential. This finally guarantees Financial Freedom. And this zeal must manifest itself in a consistent attitude when it comes to “selling or trading” on the market. With third parties or with oneself, depending on the case.

Apart from this basic attitude of recognition of own value, there are others necessary to make the sale of production capacity effective:

1. Understand that this is about a BUSINESS and nothing personal.

That you are selling yourself as if you were selling any other product. There can be no fear or inhibition. Rejection is an inescapable aspect of the dynamics and sales attitudes cannot be conditioned by its effect. There is an ethical and moral obligation oneself to sell one’s production capacity at the value it has. This is essential for Financial Freedom. After countless rejections comes acceptance, and this is all that is needed.

2. Have a self-sufficient Ego.

One depends on oneself and not on the goodwill of others or the conditions that some conjuncture may impose. You must be sure that your own production capacity has the possibility of transcending the circumstances that prevail along the way, favorable or unfavorable. For this reason, there must be a permanent investment in its care, updating, and development.

3. Obligations and work must be taken seriously. But don’t take yourself too seriously.

It is the production capacity that is being traded in the market, not the person behind it. While it is true that they are two dimensions of the same individual and interact closely, they can also protect each other. The personal dimension can support and “take care” of the professional one, and vice versa, depending on the situations that arise. The professional dimension should prevent many things from reaching the person, and the person should always give the person a human touch.

4. Patience and perseverance are the two most important qualities of the professional attitude to negotiate the production capacity in the market.

Perseverance is the daughter of patience and has power like few things. Almost nothing is out of reach for a person who perseveres on the right path. And patience is one of the most important human values. The best definition of patience is “quiet to wait.” However, is there anything more difficult than that? One thing is of course to wait, but another thing is to do it calmly. The latter is only possible in the serenity of spirit that faith grants, the assurance of being right, the confidence of knowing what is being done, and the calm that a healthy control of emotions grants.

The way to manage money for Financial Freedom.

Apart from the essential ability to generate money (effectiveness), Financial Freedom requires that there are basic skills to MANAGE IT. Without them, the production of money becomes a circuit that has no favorable end.

These are some fundamental rules to be efficient in money management:

1. Never spend the money that is considered Capital to generate more money.

Accounts must be managed independently. Although the source of both incomes is the production capacity when things have worked well it is important to conserve money that can work “independently”. This money is Capital. What Capital produced must be used for expenses. If eventually, the money of Capital is not producing income that can be used in a sustained way for expenses, then the production capacity must be activated to supply this lack and thus keep Capital intact.

It is important to understand that building Capital is not easy and takes time. Therefore, it is not a judicious measure, in terms of Financial Freedom, to allocate it for spending.

2. Capital money must always be in motion. It must be activated.

That is, it should be used to raise more money. This of course involves risk, but it must be addressed and managed. There is NO Financial Freedom if the money is not invested to generate more money. And that way, at some point, the production capacity is put under less “pressure”.

The mechanisms that exist to optimize the use of Capital and minimize risks are many. And its application depends on the particularities of each case and each person. There are NO recipes for this. The only advice worth following is the following:

Investments aimed at generating more money should preferably be made under the coverage of knowledge and skills defined by production capacity. People shouldn’t invest in something they do not know well. Unless this is marked by unquestionable opportunity and clear external support.

3. Expenses should never exceed income.

This seems like a very simple statement, but therein lies, as in other similar respects, its enormous power. As long as you NEVER spend more than you generate, financial stability contributes to Freedom.

4. All debt must be generated to activate the money received.

In the absence of emergencies, the debts should not be used to cover current expenses.

5. As far as possible, any financial emergency must be resolved through production capacity and not by accumulated capital or debt.

If for any reason the production capacity is insufficient or cannot be used, the situation must be resolved by first resorting to debt and ultimately to Capital. In these cases, it is also recommended that the debt be protected in an equitable relationship with the available Capital.

In any case, the first measure that must be adopted to face unexpected financial situations or emergencies is the reduction of expenses.

People consistent with the premises of Financial Freedom NEVER face unfavorable situations with despair.

These situations are as natural as the favorable ones and must be faced with the same spirit. This is another “treasure” that life hides from most people.

Who understands and faces unfavorable situations with the same spirit as favorable ones, ends up overcoming them, and acquires invaluable knowledge and strength. In the life of purposeful and action people, many times more are lost than they are gained. This is the natural rule. Financial Freedom requires that the premise be perfectly understood: ” In life, only those who have lost win and only those who want to win lose .”

The concept of SAVINGS must be understood as a mechanism to nurture Capital and not aimed at “punishing” expenses beyond what is recommended.

Fortune and Financial Freedom are NOT achieved based solely on inflexible savings.

The production capacity is like the water tap in a house. Here no one decides to accumulate water in additional reservoirs if there is no specific purpose for it. The same applies to savings. If there is no specific objective, saving is meaningless when the provision is fully activated. Poorly conceived decisions about saving can affect production capacity, in the same way, that a house full of water reservoirs can alter the natural use of the connection.

Saving is recommended to shore up Capital when it has specific objectives. Otherwise, it only ends up affecting the quality of life and “depreciating” the active production capacity.

When saving ends up being just an account in the Bank, it tends to become an “illusory guarantee”.

In the same way as a job or a Business. However, when savings are “active” they contribute concretely to the Financial Freedom provisions.

The evaluation of investment options and risk calculation is the subject of another analysis. They must of course be done with all care and support. But this does not affect the premises that govern the existence of production capacity and the consequent Financial Freedom.