I started to buy stock funds from the end of June, in less than half a year, my return is about 7%, if the shameless annualized view, the annual return is more than about 13%. It’s certainly not a great score, but the point here is that my risk of getting this payoff is low. I also did not spend much time, an average of 5-10 minutes a day to read the market, and another ten minutes a day to read the financial news. Without any knowledge of financial accounting. According to China’s current situation, as long as the policy does not appear a major historical crisis, the economy will operate normally. Direct buy index fund annual income 10% should also be no problem.

Recently I read a book about financial management “Value investment Actual Combat Manual”, which are all plain words and very good.

Our financial goal should be to achieve this financial freedom.

Let’s say it costs $200,000 a year to maintain a comfortable living. Let’s say you have a 10% return on assets, so when you have $2 million of assets. You touch the threshold of financial freedom. Don’t worry about whether 200,000 a year is enough, you can also ask for 300,000 high quality, this is just a variable. If you go back to live in a tier 4 city maybe 100,000 a year is enough. The dumbest index fund could return an average of 10% a year if there were no major changes in the future. So what matters is where did you get the $2 million? If you save $50,000 a year, will it take 40 years to have $2 million? Of course not. You forgot compound interest. If you save $50,000 a year, by the end of the second year you have $105,000. In the third year you have 165,500. Because the annual rate of return is exponential, the bigger your base, the bigger the amount of return, so the later the growth is faster. So let’s say you have $1.5 million, and you’re going to get $150,000 a year, and you’re going to get $50,000 a year, and you’re going to get $200,000 a year. So in less than 3 years you’re worth $2 million. You did the last quarter of the total in less than three years. So the point here is, you need to reinvest the proceeds, turn the money into a yielding asset. Now it’s all about the hard part. How do I get started? If you have a mine in your home, you may start at home with 2 million dollars, and you are standing at the end of the line. If you join a great startup, and it takes off and goes public, and you sell your options for $2 million, you’re at the end of the line. But as we all know, none of this is a sure thing. Because these things are out of our control.

So what can we do? Saving money, of course. The key here is to focus on cash flow. It doesn’t matter how much you earn, what matters is how much you have after your expenses. If you make $20,000 a month, you spend $20,000. Without positive cash flow, you are literally locked out of financial freedom for life. If you spend $10K a month and spend $5K, you’re adding $5K a month to your wealth, and sooner or later you’ll reach the point of financial freedom. If you spend $20 a month, instead of spending $15, you’re left with $5. If you control your spending and spend $10 per month, you’ll have $10 more in assets per month, and you’ll reach financial freedom sooner.

The more early, the more positive cash flow, the faster the later improvement. So when you’re only earning $5K a month, you shouldn’t be thinking about increasing your return on assets, you should be thinking about increasing your cash flow. At this stage, it’s all too easy for you to spend time raising your salary. There’s not much principal in this period, so there’s really no need to worry about investment returns. After the income reaches the average level of the industry, it depends on luck and strength to raise your salary at this time, and there may not be too much room for improvement. At this time, in addition to focusing on investment and financial management, we should pay attention to cut unnecessary expenses and try how to obtain income outside of work. With a large amount of capital, you can work according to your interests and do more research on how to improve your investment returns.

To sum up, we should focus on generating as much positive cash flow as possible, turning cash flow into a earning asset, and then waiting for the day when we have enough to get away from work.