In my work with Infinite Prosperity, I speak with 40-50 people a day who are at the start of their personal financial journey.

Many of them are constantly bombarded by marketing in the industry.

• “Secure Your Financial Freedom Today”
• “Become Financially Independent!”
• “Financial Security is KEY”

You’ve seen all the ads.

After delving into the core values of my prospective clients, I’ve discovered something shocking!

Hardly anyone knows the difference between Financial Security, Independence, Freedom, and Abundance.

This short blog post will provide the answers once and for all, including my opinions on where to start and in which order to proceed.

1. Financial Security

Financial security is a state of mind.

• Financial Security is the peace of mind you feel when you own the ability to generate a level of income that covers your living expenses.
• Financial Security could come in the form of being young, energetic and employable… it may, therefore, diminish in older age, if employability governs your income.
• Financial Security could also come in the form of owning the ability to generate income via a particular skill such as investing, trading or selling.

Despite the form in which it shows up, Financial Security is always a state of mind. I’ve known equity millionaires who don’t feel financially secure. Why? Because their wealth is non-liquid and negatively geared, meaning the income from their investments don’t even cover the running costs of those investments (let alone their other basic living costs).

2. Financial Independence

Financial Independence (AKA Financial Freedom) is the state of having enough passive income to cover living expenses without having to work actively for it.

Financial Independence comes in two stages: Transient and Eternal.

In the Infinite Prosperity course, we refer to them as Stage 1 and Stage 2 financial independence.

Stage 1 Financial Independence can arise from creating an income stream that requires little to no work on your behalf. Examples include starting or investing in a business that runs without you. Forex trading, stock trading, writing a song or a book (royalty income), etc.

While these forms of passive/semi-passive income can last forever, we must be realistic in realizing that some won’t. This is why we encourage Infinite Prosperity students to aim ultimately for Stage 2 Financial Independence.

Stage 2 Financial Independence is the ability to maintain Stage 1 Financial Independence regardless of Market, Mind, Motor-Skills or Mortality. If the market moves in any direction, your income stays put. If you lose your mind, your income stays put. If you lose motor skills, your income stays put… and even if you lose your life, your income stays put.

We create Stage 2 Financial Independence by generating enough liquid assets to return our desired annual income based on elementary-grade low-risk interest-bearing investments with sound diversification.

The figure I use is 5% p.a – No matter what happens, I’ll always be able to generate a 5% return.

The formula for Stage 2 Financial Independence becomes:

Expenses (Desired lifestyle cost per year) / 0.05 = Financial Income Figure (FIF)
E / 0.05 = FIF

Eg. If you require $100,000 per year to live your ideal lifestyle, then your Stage 2 Financial Independence figure is $2,000,000.

If you can generate $2M in liquid assets, you can invest at 5% and never work again.

3. Financial Abundance

In layman’s terms, someone who is Financially Abundant is “rich”.

Financial Abundance refers to the state of having more equity and income then you could reasonably spend.

Abundance, wealth, riches is what most people are aiming for. Many people think “getting rich” will make the biggest impact on their lives.

I have a slightly alternative view on the matter…

The horse before the cart

I’ve seen it all over the last 15 years. I’ve seen guys with plenty of Financial Security, but no freedom and no abundance. I’ve seen guys who are Financially Abundant, yet fearful and insecure. I know millionaires who have all their wealth tied up in equity, while their incomes are exhausted by negative gearing.

Every possible combination, I’ve seen it.

And through witnessing this, I have chosen a very specific financial route that I both practice and preach in the Infinite Prosperity community.

This is it…

Knowledge. Income. Equity.

This is the order of operations that I encourage my students to adopt.

https://www.youtube.com/watch?v=kGToBWuvcrs

1. Chase the knowledge first. You can read, grow and develop your way to Financial Security. You can learn real income generation strategies that you can begin implementing within the week. Knowing they exist, and knowing you can make them work for you is the first step in Financial Security. Remember, Financial Security is a frame of mind brought about by knowledge and awareness.

2. Chase income second. Specifically, Chase high-quality income that is scalable and outsourceable. High quality, scalable income is what moves you toward Stage 1 Financial Independence.

3. Chase equity third. By siphoning off an ever increasing portion of your growing income, you begin accumulating equity and growing wealth. This is where your net worth grows into the many millions over many years. This represents your Financial Abundance.

Pursuing your financial journey in this exact order is what I believe to be the most effective approach to personal finance on earth.

Knowledge (Security), Income (Independence/Freedom), Equity (Abundance).

• Being “rich” through non-liquid equity with no security nor passive income is not something to aim for.
• A false sense of security through low quality single-income streams is not something to aim for.
• The wisest financial plan is to become secure, reach independence and grow your wealth over time.
• The wisest financial leaders have all three.

If this was helpful to you, please share it with a friend in need.

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