“My definition of financial freedom is simple: it is the ability to live the lifestyle you desire without having to work or rely on anyone else for money” – T Harv Eker

I have to agree with T Harv Eker, financial freedom really is that simple. Despite this we are frequently surprised by the number of people that do not seem to grasp this concept. We have found that most 20-40 year old men and women seem to fit into two distinctive categories:

  1. Saving money to retire at 65 year old
  2. Not saving at all

Both of these are quite scary to us. Before we start on why that is, we would like to share a stat with you:


90% of people are unhappy in their jobs – Forbes

That is a hell of a lot of people. How do you feel about doing your job for 45 years? If you are in one of the lucky 10% that love their job we are truly happy for you. If not and you are in the first group then why are you aiming to retire when you are 65 years old?

For the second group of people  who are not saving money and are spending what they earn. It is going to become gradually harder for you to accrue the amount of money that you need to become financially free.


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Financial freedom is where you have control over what you want to do in life. It means that your decisions are not constrained by money. If you wanted to it means you could go up to your boss and tell them “I QUIT!” and still have enough money to live off comfortably. I am sure you are wondering if this is really possible. Yes it is, however we need to grasp some concepts.


An asset is something that puts money in your pocket.

“If you count all your assets you always show a profit” – Wilson Mizner

Good examples of assets are properties that you rent out, Stocks and shares or even a passive online businesses. All these things put money into your pocket if left alone. They provide you with a Passive income or an unearned income (Click to find the definition of passive income).

  • With rental property, the tenants pay you rent that will provide you an income month on month
  • With Stocks and shares, the companies that you invest in will pay you a dividend each year for investing in their companies
  • With a Passive Online Business providing you set it up right it can earn you money every month without you trading your time for money

An asset is not your own home. This is simply because it does not provide you passive income. A way of making your home into an asset is by taking in a lodger.


A liability is something that takes money away from your pocket

“Surround yourself with assets not liabilities” – XPRESARE

Good examples of liabilities are cars (Especially on finance), TV’s and holidays. All these are terrible for your bank balance however are good fun. You can of course buy these items however it is ideal if your passive income pays for your liabilities.

A brand new car depreciates by 11% by the time you have driven it out of the showroom. It is not an asset.


The Magic of Compound Interest

“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t pays it.” – Albert Einstein

We love compound interest. The reason for this is that it is so powerful if used correctly. Did you know that every pound/dollar that you spend now will be worth four times as much in 30 years time. So when you look at that cheap coca cola which only costs one pound/dollar think again!

Ok so check this out (a little bit of maths), If I have one dollar/pound which is getting 5% interest how long will it take me to double it to 2 dollars/pounds?  Erm that’s a simple question 20 years. Well you would be wrong it is 14 years. That is 6 years less than you thought. In fact you would have almost tripled your money by 20 years. The reason is because interest does not increase in a straight line, it increases in a curve.

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The reason we are telling you this is because the earlier you start saving the better. Let’s look at an example:

John is 25 years old and after reading the “what is financial freedom?” blog post by clever cash flow. He saves up £25,000 and invests it in stocks and shares which give him a modest 5% return.

Alice is 25 years old also however thinks the blog post “what is financial freedom?” is a load of tosh. She waits until she is 45 years old and then decides to save a £1000 a month in a panic.

By the time Alice is 45 years old, John’s investment has increased to £67,816.

How long would it take Alice to catch back up? It would take Alice 9 years and £107,000 of her own money to catch back up. Those 20 years of waiting cost Alice £72,000! She is probably kicking herself now.

The take home message is save now, the earlier the better.


The financial freedom model

“Change your focus from making money to serving more people. Serving more people makes the money come in.” – Robert Kiyosaki

So now we have three important concepts under our belts:

  • Assets and liabilities
  • Passive income
  • Compound interest

Most peoples cash flow looks like this.

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However this will not create long lasting wealth because if you stop making money you will go bankrupt. How are we going to achieve financial freedom?  In essence we have to buy assets with our money. This then will generate a passive income that we can use to spend on liabilities. Of course the more liabilities TV’s, holidays and cars you want, the more assets you will need to buy these liabilities.

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By continuing to feed this cash flow our assets will continue to grow. Eventually our assets will be so large that the passive income they produce will be able to buy all our liabilities. We can then reinvest the excess passive income into more assets. This then becomes a loop and we no longer need to make money to be able to live and the assets will continue to grow.

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Congratulations, we are now financially free because we no longer need to generate income and trade time for money. You can now do whatever you want when you want. Go enjoy life!


How do we know how much passive income we need?

“The rich buy assets. The poor only have expenses. The middle class buy liabilities they think are assets. The poor and the middle class work for money. The rich have money work for them” – Robert Kiyosaki

This completely depends on how much you spend on liabilities. The more expensive your lifestyle, the more assets you will need to buy. The more assets you need to buy the longer it is going to take for you to become financially free. It is a vicious cycle. The easiest way to reach financial freedom is to cut down your spending. Click here for a great article on reducing spending.

First you are going to have to work out how much you spend per month. The easiest and simplest way of doing this is taking your last three months bank statements, subtracting the opening balance from the closing balance for each of the three months. Add all these numbers together and divide by 3. Here is an example below:

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It so happens that we also as a couple only spend £1000 a month (The coincidence ;D). This means that we need to get a passive income of £1000 a month to become financially free.

Action point – Work out your monthly spend now before carrying on with the post.


Set a Goal

“Setting goals is the first step in turning the invisible into the visible” – Tony Robbins

Once you have worked out your target passive income (in this case £1000), write it in your affirmations so that you can look at it in the morning. If you are looking for an amazing step by step guide to a morning routine which contains affirmations click here. It is important to make sure that this goal is SMART:

  • Specific – Targeting a specific area i.e. what, why, where, who, which
  • Measurable – Easy to keep track of. How much do you want? How many do you want?
  • Achievable – How realistically do you think you can achieve this goal?
  • Relevant – Does this goal have meaning and if achieved will it significantly add value to your life?
  • Time dependent – When should it be finished by? Be very specific with the date.

A good example of a SMART goal would be: I will achieve a passive income of £1000 per month by December 2018. This covers all the SMART criteria.


How can I achieve my target passive income amount?

“Success is doing what you want, when you want, where you want, with whom you want, as much as you want.” – Tony Robbins

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This really depends on your risk profile. If you are a risky person then typically you can achieve higher rewards (passive income/interest rates). If you find putting money in the bank an ordeal because the banks may go under then you will get no passive income. Why we are saying this is because a risky person may be able to achieve a return rate of 10% to 15% where as a low risk person may only be able to achieve 3%. It really depends on yourself, the risks you are willing to take and how financially knowledgeable you are.

Low risk beginner strategy

Put all the money that you have in to a bank savings account that gives you a 3% interest rate. If you want to achieve a passive income of say £1000 per month. You would need a saving pot of £400,000. If you start at £0 and save at £1000 a month you would achieve your pot size in 23 years with compound interest.

Medium risk intermediate strategy

You are more financially knowledgeable and you are willing to invest in stocks and shares . You may invest in funds perhaps even index trackers. You may stretch to investing in a residential property for you to rent out and even may dabble in passive online businesses. This may achieve you a 6% return on your money meaning to earn £1000 per month, you would need a pot size of £200,000. If you start at £0 and save at £1000 a month you would achieve your pot size in 12 years with compound interest.

High risk expert strategy

You are incredibly well versed in investing. You know how to flip properties and do HMO (houses in multiple occupation) investing. You invest in single stocks and shares and know how to analyse share fundamentals. You also have passive online businesses that generate you money through affiliate earning and dropshipping. This may achieve you a 12% return on your money (Or even more) meaning to earn £1000 a month passively, you would need a pot size of £100,000. If you start at £0 and save at £1000 a month you would achieve your pot size in 6 years.

As you can see all these strategies take time however it is assuming that you start on £0 and that you save £1,000 a month. Of course increasing either of these two figures will make you get to your goals much quicker. If you start younger let’s say at 20 years old and use the medium risk intermediate strategy you would be 32 years old when you are financially free. That is certainly better than 65!!!!

Action point – Decide which strategy you will be using over the next year. Calculate the pot size you need and the amount you will be saving over the next year. Write this down in your affirmations


What are the different ways of generating passive income?

“A wealthy person is simply someone who has learned how to make money when they’re not working” – Robert Kiyosaki

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There are 5 main sources of generating passive income. Each of these passive income streams have advantages and disadvantages. This depends on the amount of time that you have to dedicate to it and the amount of money that you have to invest:

  1. Bank account interest – An incredibly safe way of getting your passive income. In the UK the banks are protected by the FSCS (Financial services compensation scheme) which will protect you up to £75,000 even if the banks go bust. This is incredibly unlikely however the compensation scheme is a nice bonus. It also requires very little time to research the best savings account and bang your money into it. The only thing is that you will be generating maximum of 3% which is just above inflation.
  2. Stocks and shares – They have a slightly increased level of risk and require some financial knowledge. Stocks and shares can encompass from speculating in penny shares (VERY VERY RISKY) to putting your money into a passive fund such as an index tracker. If you are incredibly good (lucky) at penny shares you may be able to make a 20% + level of return. Whereas if you are investing in an index tracker your return may be closer to 5-6%. Trading shares such as FOREX is NOT passive income because you are trading time for money. It is a job.
  3. Buy to Let Property – To invest for passive income in Buy to Let property you will need a minimum of £25,000. Yes there are ways of getting a property for no money down lease options and rent to rent spring to mind. Are these strategies recommended for beginners? Hell no. If anyone recommends these to you and you are beginner run the other way. FAST! With single vanilla Buy to Lets you should expect around a 10% return. For multi – lets where you are letting to more than one person increase that to 15-20%.
  4. Passively run business – This is usually although not always referring to online businesses. It can be achieved through drop shipping, affiliate marketing, membership sites, niche sites, the list goes on and on. The returns on an online business are really infinite. It however will take up the most time especially to get started. Unless you are a god at online business expect at least 6 months of hard graft before you are able to generate an audience who may overtime generate a revenue. Definitely a long term proposition.
  5. Peer to peer lending – Admittedly not something that we have done personally. In effect you lend people money facilitated through a third party site such as prosper.com. This can earn up to 8 to 12% return if you invest wisely. Of course it does come with risks mainly if the person does default.

So we now know why T Harv Eker right at the beginning of this post said financial freedom is really that simple. You should have a  goal and a strategy for achieving financial freedom which is based on your financial knowledge and risk profile. This will be completely individual to you and achievable. Now all you have to do is go and do it. Please feel free to ask any questions in the comment section below.

P.S. If you are still struggling to come up with a financial freedom plan there is a handy worksheet that you get if you sign up with your email below

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