The Composition of Financial Control
How to Realistically Build Wealth and Gain Financial Freedom
Podcast | Video | Artifact
Disclaimer: The ideas in this article was written by a Human.
Dear Intelligent Reader,
Dear Intelligent Reader,
I remember when I got my first taste of real passive income. It was 2019, and my father-in-law had just recently passed away. As I was trying my best to comfort my wife and be there for her, I was going through an internal change myself. In our moment of grief, we decided to relocate to a whole new state, leaving everything that we had built behind — which, admittedly, wasn’t much. At the same time, I was developing a new skill set for myself.
Back then, I was a senior graphic designer for a college in the Pacific Northwest. I began working on motion graphics and video editing, and I stumbled across something that piqued my interest: the online learning market. It was growing exponentially.
At the time, I was practicing martial arts, and I really enjoyed learning and teaching what I was learning to my fellow students. I then realized that I had a knack for instructing and making things plain enough for someone else to grasp. I had cultivated a passion for it, and I was challenged by my sifu (Martial art master) to write a book. After I wrote the book, I had this crazy idea to turn it into an online course — and that’s how a new journey began.
I was watching video after video, trying to absorb everything I could about online course development. In the months following the passing of my father-in-law, I worked tirelessly creating and developing learning videos. Long story short, I published my first courses on two online platforms called Skillshare and Udemy. One course was about graphic design — teaching people how to use Adobe Illustrator — and the other was about leadership and self-development — teaching people principles to become better leaders.
Little did I know that this experiment would lead me down a pathway that would benefit my life in so many ways. Initially, I didn’t even know what to expect. It wasn’t until about two months later that I got my first taste of passive income. I woke up and saw a deposit in my PayPal account for work that I had done a few months earlier. Then, the next month, I got another deposit, and then another one, and so on and so forth. That’s when I realized how much I really LOVED the concept of passive income.
This experience taught me a lot, and I was reminded of the lessons I learned while reading Rich Dad Poor Dad about the 4 cash flow quadrants and active income versus passive income.
But this article isn’t about online courses.
It’s about learning the architecture of controlling your own finances and eventually gaining freedom from the financial systems that are designed to imprison us as slaves to money.
After that experience, I continued learning more and more financial principles, and my financial literacy increased dramatically over time. Over the years, I have made many costly mistakes, but I have also learned priceless lessons. Today, I can honestly say that I am more financially savvy than the majority of people I know. What really changed wasn’t just my level of income — it was my level of understanding about financial principles and how to grow and manage wealth.
Wealth isn’t built in a day or even a year. It is built through generations of proper management and hard sacrifices. When it comes to finances, the majority of people are usually operating from these three factors:
Fear
Ignorance
Instant gratification
These three factors keep the majority of people stuck under the power of poverty. And make no mistake about this: poverty has more to do with mindset than it does with materialism.
If you struggle with any one of these problems, I want you to know that there is a solution. If you can learn to combat these three low-level principalities, then you will be able to escape the working rat race and gain greater financial freedom not only for yourself, but for your family.
I want to share with you three financial concepts/principles and some strategies that will give you a different perspective, help you overcome these three wealth killers, and gain more control over your financial affairs.
Concept 1: Consume Less—Earn More
Now, this goes without saying, but many of us live way beyond our means—including myself. Meaning, we tend to spend more money than we make. This behavior is a deadly assassin when it comes to gaining financial freedom because it is like self-sabotaging your own ability to become wealthy.
And it’s not like people do it intentionally. Believe it or not, that is actually the root of the problem. Most people are unintentional in how they spend their money. It’s one thing to have it, but if you don’t have it, then you shouldn’t spend it. Even if you do have it, you shouldn’t spend it recklessly.
Building financial wealth takes a great deal of time and effort. You must be intentional when it comes to both your spending and your earning. This is basic economics and character development.
Why both?
Because it takes a great level of discipline to consistently avoid overspending so that you can save and invest your money.
So, how do we fix this?
The first thing you should do is take account of your expenses. Make a list of all your costs and break them down into four categories:
Essential Fixed Costs
Essential Variable Costs
Non-Essential Fixed Costs
Non-Essential Variable Costs
This will help you visualize how much you are actually spending on a weekly and monthly basis.
After you do that, you should begin cutting your costs. Get rid of or reduce any non-essential and essential costs as much as reasonably possible. You must be willing to sacrifice some of your comfort today so that you can help secure it tomorrow.
You have to learn to think about money as energy. If you can consume less energy today, then you can keep more of your earned stored energy for tomorrow. Always remember to think about your tomorrow—because it counts.
Concept 2: Assets Over Liabilities
My dear reader, I have spent a great deal of time learning about these two principles, and I can honestly say, without a shadow of a doubt, that understanding them has forever changed the way I view my finances and relationships. If you understand these things already, then I salute you. But if you still struggle with applying these principles, then take heed of what you are about to discover.
So, what is an asset, and what is a liability?
I like to think of an asset as anything that adds substance to your life or increases your value. Another way to look at it is anything that adds to or multiplies you in a positive way. And this doesn’t just relate to money.
On the other hand, a liability is anything that subtracts substance from your life or decreases your value. If it subtracts from or divides you in a negative way, it is a liability.
They can both be a person, place, or thing. And that person, place, or thing can also be both an asset as well as a liability. They are not mutually exclusive terms. On one hand, something can be adding to you, while on the other hand, that same thing can be subtracting from you. The question is:
Are you gaining or losing more from it? That will determine its true position in your life.
For example, real estate can be seen as a good asset. But sometimes, a house can become a liability, especially when it is costing you more than it is worth.
An asset can also be a skill set like fishing and being a chef or a character attribute like faith, integrity, and discipline. Even your behaviors can be an asset or a liability to you.
The bottom line is this: In life, you want to focus on these two things:
Gaining assets
Getting rid of liabilities
There will always be some liabilities in your life, and an asset can become a liability if it is not managed correctly.
One of our responsibilities is to invest in people, places, and things—and most importantly, yourself. If something is an asset, it will eventually give you a return on your investment. However, if it is a liability, you will experience a loss on your investment. One thing you should ask yourself is:
Are you an asset to the people around you, or a liability?
Think about it.
Concept 3: Active versus Passive Income
Now, these two concepts are ones that can really skyrocket your finances if you can apply them correctly. The majority of people learn to acquire only active income streams and never learn how to tap into passive income streams. They work hard for a little bit of money and never learn how to make their money work for them. Here is a quick breakdown of both.
Active income is money earned by working for it and providing a service. In effect, you are trading your time, skills, or labor in return for a sum of energy in the form of cash, capital, or some other type of payment. For example, if someone hires you and gives you an hourly wage or salary for your services, that is active income.
Passive income is money earned with little to no day-to-day effort. It usually requires work to set it up in the beginning, and once it is established, minimal effort may be required moving forward. It doesn’t require you to continuously trade your time for earnings. Instead, it creates earnings for you as long as the mechanism or investment continues to operate as intended. For example, monthly royalty payments from a book you wrote in the past are a form of passive income.
Almost all adults operate primarily in the realm of active income, and truth be told, there is nothing wrong with that. But until you learn how to move into the realm of passive income, financial freedom will remain difficult to achieve. And the basic process is really quite simple.
Active income can help you build passive income. It is usually the starting point. Here is a four-step system:
Earn money actively.
Manage the money correctly.
Invest earned money into building assets.
Use passive earnings to create additional passive or portfolio income.
If you can learn how to operate in and master both realms of income, you can move closer to achieving financial mastery and control.
Gaining financial control does not happen in a day, a week, or even a month. It can take years or even decades to really master these things. What I have shared with you thus far is but an appetizer for a larger meal to come.
There are many more principles and financial concepts to learn and apply, but mastering these three will definitely allow you to build a solid foundation that you can continue to grow upon. I hope this information was helpful, even in the slightest.
Thank you for reading, and until next time, have a blessed day.
Yours truly,
The Modern Strategos
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