- This is not financial advice, this is an opinion. Investitin.com staff are not financial advisers.
- This is not a buy, sell or hold recommendation of any assets mentioned in this interview.
- Do your own research before you invest in anything.
- This article/interview has been published for free.
- Your capital as at extreme risk and you can lose it all when investing in ICOs and cryptos.
- Please discuss this with your local financial adviser before you invest.
- Full Disclaimer
Financial Skills Toolbox
A toolbox is a dangerous place, it contains hammers, saws and nails. If used eloquently they can build your financial fortress. On the other hand, if those using them do not have the experience or the patience to learn how to use them, they can cause unintentional damage.
There are three different tool boxes to reach financial independence: importance.
- Your Skills set.
- Financial knowledge.
- Financial tools.
Financial independence is a journey a process which creates opportunities to acquire assets. These assets will pay for your desired lifestyle. How do you define your own financial independence?
Your Skill Set
In order to achieve financial independence, you need to master the following skills relatively well.
- Self Knowledge and Resilience
- Processing Information
- Emotional Control
- Decision Making
They are the basis of good decision making. Knowing yourself, what stimulates you, what motivates you, what triggers an emotional reaction and what are your weaknesses.
Resilience is the capacity to take punches, get knocked down and then the ability to get back up will push you through the hardest of financial times.
Information is essential. Processing it makes it valuable – it keeps you aware of the financial opportunities and the scams out there.
Emotional control is what separates those who have the patience to brush off the tantrums of the market from those that will sell in a panic.
Decision making brings everything together. It is about generating alternatives, looking at the pros and cons of each, evaluating the risk than taking action.
Financial Education Toolbox
In general, you find that the most common financial wisdom boils down to
- Save, start early.
- Be Frugal.
- Research before you invest.
- Buy low sell high
- Dollar cost average
- Compound interest is the most powerful force in the universe.
- Have an exit plan before you go into a deal
- Persist in your FI journey
There are many many books and blogs out there. Some are very serious, others make finance look like the adventure. Finding a source of information with the right resonance for your brain can be very good to nudging you in a direction which is right for you.
- Free Books
- Online Blogs
Financial education will lift the curtains from the financial jigsaw puzzle. It will show you how you can make the best out of the opportunities present relative to your financial situation.
What makes financial tools different from one another
- Stability / Rate of Change
The risk is the potential to lose the capital invested and also the time and energy which preceded the decision to invest.
Opportunity cost is the risk of missing out on other opportunities while your capital is locked in your investments.
Time needed to implement an investment opportunity
Investing in a global index fund takes five minutes, investing in a side hustle could take 5 hours a day for several years.
The expertise needed to make your investment a success
Investing in cryptocurrencies requires a certain level of knowledge on this market, so does invest in the dog grooming salon. Each investment needs the expertise to deliver value.
Scalability: How quickly can you duplicate the investment process to duplicate the profits
Selling your time for money can only be scaled so much; because of limited time. Creating widgets which can be duplicated infinitely and sold individually is the best way to earn passive income and ensure your early retirement.
Rate of Change: How quickly is the environment changing
The rate of change will undo both the level of risk and the estimated returns. Some environments change slowly, others at breakneck speed.
The above parameters are a measure of how an investment can be analysed quickly in terms of commitment and stability. Asking the right questions; is the process of due diligence. Finding out if an investment is a right fit for your current circumstances and will it increase the chances of financial freedom.
Financial Freedom toolbox
Passive refers to “set it and forget it”. This is the tortoise way of getting to financial independence. Safely and securely. Saving for financial independence is defined differently than a typical savings plan.
Those seeking FI save than “regular people” do in order to achieve the 25x yearly expenses and/or have dividends which can cover your desired lifestyles. These savings can either be left in a bank account or used to generate more income.
Tools for passive income:
- Stock index funds (Vanguard) (Dollar cost averaged)
- Dividend Stock index funds (Dollar cost averaged)
- Private pension
- Dangerous Jobs Early pension (ex: Police/Military/FireFighter)
- Social security
- CDs Certificates of Deposit
- Self-owned Rental Properties managed by third parties
- Crowdfunded rental properties (See P2P property list)
- Crowdfunded Asset-backed Loans (Such as Estate Guru)
- Invoice Financing
- Public Pension
Crowdfunded rental properties are properties which are owned by a crowd of investors. These investors buy shares into an SPV (Special purpose vehicle). These SPV are a single company, which manages the asset, profit generated by the SPV, is divided amongst the shareholders/ crowd of investors.
Crowdfunded loans are loans which are financed by a crowd of lenders. When these are asset-backed, it means that in case of default an asset will be sold to return the capital (or part of) back to the lenders. Although an asset acts as a guarantee, the investment is not bulletproof. The risks include erroneous asset valuations, market changes and debt collection costs.
Starting early and saving frequently makes the journey to financial freedom less risky. Positioning oneself early to benefit from the right pensions, benefits and annuities is an important shortcut for financial independence. Take the right steps toward your financial independence.
Some of us, have had a peek outside of the matrix later on in life, thus we need more tools to bridge the gap between now and the FI date. The next set of tools come with more risks attached, using them could set you back further than if you did not use them at all.
Check out these exercises will keep you stay on your financial resilience journey.
Semi-Passive income sources
- Consumer loan investing (Such as Bondora) (See full list of EU and US p2p lenders)
- Individual Stock Dividend investing. Invest in dividend stock and use the dividend to buy more passive assets.
- Stock trading then invest in them. Buy low sell high.
- Private Equity and Startup investing.
- Investing in Precious Metals and stones
- Create an invention copyright right it, then sell the copyright to those who need it.
- Self Managed Rental properties: Buy properties rent them out, use the yield ot pay off the mortgage or buy other passive assets. See Also Property Investments.
- House Flipping: Buy property and then sell it for a higher price.
- Car Flipping: Buy used cars, fix them up and then sell them.
- Planting an orchard or timber.
- Whisky and Wine: Buy immature whisky and sell it for more when it matures.
- Dealing in Precious Collectibles such as stamps.
- Buy your own camels and goats and live off the proceeds. (Maybe this is taking it too far?)
Online side hustles
The internet has created a level playing field between corporations and small-time entrepreneurs. Before the internet, corporations with finance could corner markets because they had the means to monopoly distribution networks.
The cost of reaching an audience has fallen drastically in the internet age. Those who want can now exchange value with others more easily. When this value can be delivered by electronic means, then both the provider and the consumer will benefit from the ease at which the internet allows them to do this.
- Write an ebook and publish it on Amazon
- Start selling products online, via Amazon or eBay
- Find temporary projects using Fiverr , ETHLance
- Start your own blog or website
Offline Gig economy / Side Hustles
- Use your house or car to earn money. Airbnb, Uber, etc
- Turn your hobby into a business.
Cryptocurrency Passive Income
The list below is a selection of cryptocurrencies projects and systems which have the possibility to generate a passive return. These investments are definitely not for everyone, a level of expertise is needed in order to judge the risks when investing in them. There are many risks such as: Legal, Technical, Competitive and Regulatory. The level of risk in crypto assets is akin to a 5x leverage junior gold mining exploration stocks ETF.
Cryptocurrencies: If your investment profile fits this volatile market, there are opportunities to make and lose a lot of money.
Crypto passive income Systems
Stay safe when investing, check our Cryptocurrencies investment tools.
Semi-Passive Crypto investments
Passive Crypto investments
- Genesis Cryptocurrency Mining
- HashFlare Cryptocurrency Mining
- Triaconta – The price manager of CombiCoin
- Rialto – An Arbitrage fund
- HydroMiner – GPU Cryptocurrency mining (Use at your own risk!!!)
- Waves Leasing
- Decred staking
- Bitcoin Lending
- Sift – Profits from day trading Cryptocurrencies
- Populous – Invoice Financing
- Crypto Funds
- Cryptillion – A Crypto Fund.
See also Passive Cryptocurrency investing