We often hear the words "financial security", "financial freedom", and "financial abundance" from financial advisers and personal finance gurus. But what are they exactly and how are they different from each other?
Let's break them down into pieces:
Financial security is all about having the peace of mind about your future regardless of the risks that you can encounter along the way.
How to become financially secure:
A person can become financially secure if he will prepare for the risks of tomorrow by protecting himself through an emergency fund and a life insurance policy.
Financial freedom or independence means a person has the capability to enjoy life to the fullest without working for anyone else because his money is working hard for him to cover for his basic needs, protection, savings, and investments.
How to become financially free and independent:
A person can become financially free and independent by setting up income streams that will allow his money to work harder for him. A person can build a business that can work without his full supervision and management. A person can invest his hard-earned money that will generate dividends and appreciate its value over time.
A person can use the profit from his passive business and investments to cover for his basic needs, protection, savings, and investments.
Financial abundance means a person enjoys an abundance of financial wealth because of the preparation that he did years ago.
How to become financially abundant:
A person can become financially abundant by working hard to secure his future first. Once a person's future is financially secure, he can now start building income streams that will allow his money to work harder for him so he won't need to work for anyone else ever. Once a person is financially free and independent, he only needs to maintain a practical lifestyle so he can save most of his hard-earned money that he can use to build more income streams.
A person should work hard to:
- Be financially secure first.
- Be financially free.
- And then be financially abundant.
Building wealth is a slow and sometimes boring process. That's why get-rich-quick schemes are too good to be true. Now that you know the difference between financial security, financial freedom, and financial abundance, you can now go and develop a plan depending on your current situation.
Just remember, if you aspire to be financially abundant, strive to be financially secure first, and then become financially free.