Financial freedom is obtained when you no longer HAVE to work to pay the bills, this does not mean you generally stop working, the difference comes in that now you are working to improve your lifestyle and achieve your dreams.
Firstly you need to understand the basic cashflow patterns.
To clear up a misunderstanding, although we call them Poor, Middle Class and Rich, cashflow patterns, this has nothing to do with your earnings, you can be earning R100,000.00 per month and still be classified under the poor cashflow management pattern if you spending ot all and not keeping any.
Wealth is about what you keep, not what you earn.
POOR Cashflow management :
In this scenario, the household spends all their earnings on maintaining the household
at the lifestyle level that they are living. This is done by paying cash for all
expenses straight from earnings, ie -
MIDDLE CLASS Cashflow mangement : (THE MOST DANGEROUS OF THE SCENARIOS)
In this scenario, the household spends all their earning on maintaining the household at the lifestyle level that they are living through debt, wether it be Credit Cards, Store Cards, Bonds, Car Loans, Personal Loans or a combination of these. The reason I say this is the most dangerous scenario, is that if you lose your income, the stress and destruction to your life style could be tremendous as the banks, and loan agencies VERY quickly come calling. No or very little savings or investing occurs.
RICH Cashflow management :
In this scenario, the household spends a portion of their earnings on maintaining the household at the lifestyle level that they are living, and the balance is used to purchase, cash generating assets, such as Stocks, Investment Property or Businesses. The big difference here is that as the asset base grows the income grows and when the asset based income exceeds the amount required to maintain your lifestyle, you are financially free.