Copyright 2005 William Tan
Simple Steps to Financial Freedom and Wealth Building
STEP 2: Achieve Financial Freedom – Choosing Your Escape Vehicle
Do you want to achieve financial freedom? For most people, this is constantly on their mind. If you are reading CashFlow Avenue’s 7 Simple Steps to Financial Freedom and Wealth Building, chances you are looking for ways to get out of the rat race and to achieve financial freedom. Unfortunately, it isn't always as easy as it sounds.
With your Financial Goals firmly defined in Step 1, you would now have to choose your “escape” investment vehicle. There are plenty of investment vehicles in the world. Let’s name a few most common form of investment – fixed deposits, gold, bonds, real estate, stocks, stock options, mutual funds, starting a business on your own, etc.
From experience, you might probably be able to tell that every one of the above contains risk, except for fixed deposits. Profit, simply defined, is your reward for placing taking risk on your assets.
On surface, fixed deposits, look the safest form of investment but are probably the most risky because inflation rates are consistently higher that what the bank would pay you – slowly eating away your purchasing power in years to come. So, in truth, while your bank account is growing in numbers, you are actually becoming poorer. If there is no inflation (which will never happen in the long run), fixed deposits are still not the best escape vehicle because it takes just too long to appreciate. Who would want to wait 30 years before they can be rich?
Without getting involved into too much detail, let’s jump straight into action. When choosing an escape vehicle, you probably would want to set a few criterions to screen out what will and will not work for you. The ideal escape vehicle or business should provide:
Liquidity – allows you to cash out within a few days.
Leverage on Your Capital – using only your capital can be slow. Select a vehicle that provides leverage that magnifies only returns but not losses.
Fast Results – should see return on investment within the 1 st month.
Easy to Set Up – should take no longer than 1 month to start.
Predictable Monthly Return on Investment (ROI) – be able to forecast accurately your monthly
Low Risk – consistent and provides a high percentage for success
Profit with Time – with each tick of the clock, you should be making money.
Utilizes The Power of Compound Interest – snowball your returns to accelerate your wealth building process.
After running these criterions over the choices of investment available, most vehicles don’t make the cut. Of all, only 2 investment vehicles would make the cut.
Stay tuned for Step 3 for the Best Escape Vehicle.
