Everyone desires
to be financially independent and able to meet their financial obligations from
own resources. Everyone can have financial freedom. No one wants to be
partially or wholly dependent on another person for basic needs and wants.
However, many people remain in this unpleasant situation because of certain
reasons, mainly ignorance. One of the definitions of ‘Independence’ given by
Cambridge dictionary says it is ‘the ability to live your life without
being helped or influenced by other people’ while ‘Freedom’ is defined as
‘the condition or right of being able or allowed to do, say, think, etc.
whatever you want to, without being controlled or limited’. From these
definitions, we can define financial freedom and independence as the ability to
live and meet your financial obligations, without being helped or influenced by
other people. We can also define Financial Freedom as ‘the condition or right
of being able or allowed to do say, think, etc. whatever you want to
(financially), without being controlled or limited’..There are many good habits
we can adopt to help us live with financial discipline which in turn will allow
us have financial freedom. These habits are applicable to those struggling
financially as well as to those desiring a higher level of financial
independence. The following 7 keys are some of the ways we can all have true
financial freedom.
1. Understand
and value money.
A
person who desires to have financial freedom must understand money and its’
numerous attributes. Money serves three main purposes; it is a medium of
exchange, a store of value and a unit of account. In practical terms, everyone
needs to understand and know how much they need to meet their immediate needs,
how much financing they need for the future and how much they are currently
worth. Understanding money means ‘understanding how much money you have and
where it goes. It means being in a position to make the most of what you have.
I love listening to the advert we hear in recent times on the
popular CNN program ‘Quest Means Business’ hosted by Richard Quest
which says ‘Just a penny? The person who desires financial independence must
know ‘it isn’t just a penny’ but that every penny counts. Knowing this guides
your monetary choices and decisions. Most wealthy people do not waste funds.
They get good value for every penny committed. They understand that money if
properly managed has the tendency to grow. They also learn to pay themselves
first by putting away a percentage of their earnings as savings. Another
attribute of money is that it is not defined by the work done to earn it, so do
not look down on any job. Be humble enough to do anything legal to earn some
money. Lastly, treasure what you earn, no matter the sum.
2.
Create multiple streams of income
Multiple
streams of income means that you have income from several different sources. If
one source stops or is eliminated you can rely on another source. Most people
do not maximise and generate income from the opportunities they have. Everybody
has 24 hours in each day. The difference between the financially independent vs
dependent man is the utilisation and application of these hours. Whether you
work for yourself or for someone else, you can allocate more time to earning
income in addition to your main source of income. What is important is that you
do not breach the terms of your paid employment. Those with funds should
diversify their investment portfolio by investing in a variety of income
generating assets. Others with limited funds can learn a skill and equip
themselves to offer a service in addition to their main jobs. Look around you
and identify a need in your immediate community and find what you can sell, or
the service you can render to generate additional income.
3. Identify your money mistakes and weaknesses
A
person who desires to have financial freedom must understand his weaknesses and
be honest about past money mistakes, and be determined to overcome these
weaknesses. Money mistakes range from living above one’s means, living extravagant
lifestyles, not having savings, spending on impulse, borrowing to finance
excesses, poor financial planning, poor knowledge of financial matters and
others. Living for the moment and improper planning for future needs,
complacency with current state of achievement are more examples of these
weaknesses. Identify which bad habit you are struggling with and make
deliberate efforts to stop this.
4. Maximize
your strong days (Make hay while the sun shines)
“Make hay while the sun shines" is a
popular old saying that is essential for being in control of your own
financials. To make hay while the sun shines means that you take advantage of
the chance to do something while conditions are good. It also means you make
good use of your time or make the most of an opportunity while you have the
chance. To have financial independence irrespective of the stage of your life,
requires that you sow the right seed at the right time. The financial seed sown
today will grow and yield fruit down the road. Your financial decisions and
choices during the years when you earn high income should tend towards
saving maximally such that your savings and investments can finance your
lifestyle when you have retired or left such high paying jobs. It is
important to be aware that whilst certain expenses during your active years (eg
buying first home, children education) may not continue into retirement season,
you pick up new expenses (medical bills from age related ailments, higher
insurance premium etc) If we live below our means while the going is good,
we will be able to live as if we never retired even after we have retired.
Shun
the word ‘procrastination’ and take action ‘today’. Make every second count.
Learn a trade/skill when you still have the physical strength and when fewer
things are competing for your time. Sacrifice the leisures of today to study
for a professional qualification, obtain additional certification that can
boost your resume (worth). If you are an entrepreneur, build up your capital by
increasing what you plow back (retained profits) into your business and see
your business grow.
5.
Look ahead
Financial freedom isn’t only for your days in active employment
but includes the season of life when you can no longer actively
work. Everyone must take financial decisions consciously aware that Retirement
is compulsory and will happen to every one. Retirement has been
defined as ‘the action or fact of leaving one's job and ceasing to work’.
Even if you love work so much, your physical form will restrict
you from working so hard in your later years. Some people have lived a life
time of work with nothing to show for it, irrespective of what earned.
When you retire, savings from your active years should fund your
living expenses. It is therefore important that from the date you start
working, you set some funds aside for your retirement years. No matter your
current level of income, it is essential to begin saving for retirement. If you
have not started, begin now as it is NEVER too late. There are many
resources to support you in this area so seek professional advise where unsure.
6.
Your money, your relationship.
Whether you are already married or planning to get married, it
means you are in a serious relationship. Financial freedom requires that you
and your partner are fully aligned on money matters. Transparency is essential
and there should be no assumptions regarding what your financial goals are.
There should be open discussions about your finances where both parties will
agree on what strategy to pursue. Your financial freedom is incomplete if you
have financial discipline while your partner is reckless. Your financial
success is assured where you both have the same financial priorities and goals
regarding spending and saving.
7.
Understand that everyone can have financial
freedom.
No matter your current circumstances, understand that no man was
born to remain poor. There is a popular saying, ‘If
you are born poor it's not your mistake, but if you die poor it's your mistake’.
Attain financial freedom by refusing to be condemned into living a life of
poverty. With the understanding that your financial circumstances can change
positively, begin to take little steps towards growing financially. Improve
your knowledge of financial matters and apply the knowledge gained. Where
possible seek expert support and guidance from professionals to enable you maximise
the opportunities currently available to you.
***7 simple keys to your financial freedom - FinanceCoach Quarterly (Q3-2018)
***Bimbo Komolafe FCA, FCIB writes from Lagos and is a Fellow of the Institute of Chartered Accountants of Nigeria and a Fellow of the Chartered Institute of Bankers.
This is insightful. Thanks for this.
ReplyDeleteLessons learnt;
ReplyDelete1. Plan by looking
2. Learn to be creative in other to generate more streams of income
3. Living a healthy life will help you to be financially free.
More lessons learnt:
ReplyDelete1. Saving by discipline.
2. Careful investing that which is saved and keep good financial records.
3.Sort for another source of income.
Permit me ma to please share this to others.
ReplyDeleteI found it difficult to save. In real life, the higher your wage/salary, the higher your wants.
We must all know that wants are insatiable!
When we shift our focus from our wants to meeting our necessary needs, then to save will be easier.
Another point is this; don't try to live like others. Remember, the person you are ignorantly competing with, financially, receives more than you. He/she has more streams of income, or probably inherited wealth.
If you fail to realize these, over spenders tend to penury.
One vital thing we must not forget:
Prophecies are good. In fact, you are permitted to claim them by shouting A-M-E-N!
Every financial Prophesies can be fulfilled if you follow principles of God.
If you are reading this, please kindly open your bible, and Read Proverbs 13:11 and Proverbs 21:20.
Thank you FinanceCoach for sharing this. Thank you ma.
Awesome ma'am. This will great for me through the New Year you are such a life saver
ReplyDeleteThe first thing i started working on this year was my financial weakness of overspending, then i started under monetary value by taking record of all that I've earn and all I've spent, so far it's been a great decision, I've been able to save up more, these new tips u just gave me have opened my eyes to wilder things, I'm very grateful
ReplyDeleteThe road to financial freedom begins not in a bank or even in a financial planner’s office like mine, but in your head. It begins with your thoughts.
ReplyDeleteI love this article so much, I shared it with my friends. It would open their eyes.
Life lessons learnt ππΎππΎ
ReplyDeleteIn life we should know the value of money, we should also have it in mind that anybody I mean anyone can achieve financial freedom whether you earn a huge amount or a small amount of money, we should learn to create multiple streams of income, bear it in mind that if you really want to make money in life as people say, try to diversify your ways of income, so that at long last even though one fails another is one is open which it can never lead you to poverty, we should also identity our money mistakes and weaknesses we should also maximize our strong days that is in business when the business is going well you should maximize profit at that time, we should also look ahead and then money and your relationship you should try to have a partner that you have the same goals with her about your income!
By so doing you are in your way to achieve financial freedom 2019
Thanks ma i learnt a lot from this article
ReplyDelete