Financial Freedom?

Since I last wrote (see my previous post), I have come across some really good informative material on the Internet for example theminoritymindset (again a disclaimer, I am not promoting anything or anyone) just sharing what I have come across in the hope that someone else will/can share something which I have not come across and I can learn from.

Is Internet a blessing or a curse is a subject to discuss for another day.

Coming back to the question I had asked myself previously when I ended the last post, what is Financial Freedom?

The above question led me to another question, is Financial Freedom only related to the balance sheet value of an individual at a point in time?

When I first began pondering over this topic, my view was that Financial Freedom would mean that one is financially free when one has accumulated X amount of dollars in one’s bank account. But what was that amount? I found it extremely difficult to answer this question.

To dig further, I first tried to understand myself, an individual by nature. What was the difference between me and a business? The answer I found was surprising, i.e. I am a business on my own.

In my opinion both Individual and a business entity has same objectives of existence, as:

i. Consumer & Provider of goods &/or services

ii. Receiver & Payer for the goods &/or services

Economic activity revolves around the above which is driven by the ‘Needs &/or Wants’ of the individual or a business.

Now, if the above can be understood, it is extremely simple to understand your own worth.

Let’s begin our journey to understand the comparatives between an individual and a business by deliberating over some simple questions:

i. When is a business profitable or non-profitable?

ii. When is an individual profitable or non-profitable?

iii. What does a business do to become profitable &/or successful?

iv. What does an individual do to become profitable &/or successful?

In my experience, when I began to answer the above questions, I started to think beyond the normal responses which resulted further exploration.

Let us begin by answering question number 1: When is a business profitable or non-profitable?

When the revenues of a business are higher than the expenses, the business is profitable. I ask myself, is it that simple? No, it is not. The above is just a definition. The main answer lies in the answers to the following questions:

i. How does a business generate income/revenue?

ii. To generate this income/revenue, what does the business do?

So, to generate some income/revenue a business needs to do some expenses. When the expenses are less than the income/revenue it generates, the business is profitable, but it is in loss or non-profitable business if the expenses are higher than the income/revenue it generates.

In other words, it is also called the ‘Inflow and Outflow of Cash’.

If the above concept is clear, then we should ask some more questions. Remember we are still on the topic of understanding a single ‘business’.

Since this series of my ‘essays’ relate to personal finance and financial freedom, I will stick to the example of a ‘Profitable’ business. But for that, you will need to wait for part 3 of ‘Financial Freedom? Myth or Reality.

**********************************************************************

Please share your views and opinions in the comments below. My purpose to expand my horizons by connecting to the people of this world.

**********************************************************************

This article is for informational, discussion, reference or reading purposes only. There is no set Financial or Legal Advice. All information may not be accurate. Consult a financial professional before making any major financial decisions.

Copyright: Kirtan Varasia (2021)