Financial freedom is something we all yearn for, but we are not willing to do what it takes to get there. Our unwillingness is based on our refusal or lack of commitment to do things that would promote our financial independence. Most people spend more than they earn, and thus are constantly in debt. These people know that living within their means is the only way out, but the discipline to stick to what they can afford has always been the problem.
Financial freedom generally means having enough savings, investments, and cash on hand to afford the lifestyle we want for ourselves and our families—and a growing nest-egg that will allow us to retire or pursue the career we want without being driven by anticipated annual wages. Enemies of financial freedom are the things that prevent us from being financially independent.
This article seeks to draw our attention to things and choices we make daily which cumulatively inhibit our financial freedom. There is a popular saying that once we identify the cause of a problem, then you are half way to the solution. This article is purposely for awareness-creation and to encourage everyone to take their financial freedom seriously.
Ask yourself these questions:
- Wouldn’t you like to have enough funds to meet recurrent expenses?
- Wouldn’t you be happy to accumulate funds for a major future purchase instead of loans?
- Would you be proactive and save toward your children’s education?
- Wouldn’t you be excited to have enough funds to support that dream business?
- Will your retirement be dignified without enough savings or investments?
Tell me how you can manage unforeseen problems that require money without any form of emergency funds.
These are the things that prevent you from gaining financial freedom:
- Going for avoidable consumer loans:
Consumer debt is the bane of financial independence. The first step toward financial independence is to get rid of high-interest debts and free your money to work for you instead of giving it to banks in the form of debt servicing. If consumer loans are not contracted wisely, you will not have enough funds to invest.
- Spending to keep a status:
One of the reasons people spend so much money is to keep up with the Joneses. Many people buy things they don’t need just to keep up with the living standards of their friends or neighbors. Excess consumerism fuelled by enticing TV commercials make people crave things they don’t need and go to all lengths to acquire them to please their neighbours. Ignore the pressure and build up your finances instead, and you will leave your neighbours behind financially.
- Spending more than you earn:
The real key to financial independence is to spend less than you earn. Avoiding consumer debt and ignoring needless spending are primary to financial freedom. However, it takes a lot of discipline to spend less than you earn. First, track your expenses and see what you spend money on. Cut off the things you don’t need and keep your lifestyle to the barest minimum. Of course, generating more income from multiple sources as you cut off unnecessary expenses improves your chances of reaching your financial goals faster. Remember to work both sides of the equation to widen the gap between your expenses and income.
- Spending first before investing:
When you spend before investing what is left, you are stifling your financial independence. The right thing is to invest first before spending what is left. To attain financial independence, you have to put yourself first. You need to prioritise saving/investing ahead of everything else.
Save before you pay the utility bills, buy groceries or even pay the rent. Paying yourself first helps you to live on a budget, and it’s a powerful saving habit. Doing a standing order that a proportion of your income meant for investments will be deducted from source can help you invest before spending. Spending what is left after paying yourself is a great way to build wealth.
How to improve your chances for financial independence
Remember, everyone wants to park under a shade but no one is willing to plant a tree. If you are not willing to invest toward your financial freedom, who will do that for you? You cannot outsource your journey to financial freedom to anyone. No one owes you success or financial freedom. You owe yourself that duty. Do not leave your financial freedom to chance; you know you to do.
Consistent investing is good for your journey to financial freedom. You first need to talk to licenced investment service providers. Let them know your investment objectives, your risk profile, investment time-horizon etc. They will assist you to sign up for investment products that meet your needs. Continue investing, but constantly track your investments by monitoring the growth of your funds. Ask questions when you are not clear; and when in doubt, ask questions. If you are not convinced with the answers, get a third opinion.
Live within your means
Living within your means is prudence. Why do you want to force yourself to buy food from that joint, whose pricing your income cannot support? Why do you buy expensive clothes that you do not need instead of choosing cheaper alternatives with the same quality? Why do you choose to buy a car you cannot maintain? How about renting in a place too expensive for your income level? Everything boils down to choices. You are a cumulative result of your daily choices.
Have multiple sources of income
Having multiple sources of income is one of the surest ways to financial independence. While trying to reduce your expenses, try increasing your level of income too. Figure out something that will take less of your time but can rake in income. Start something! An additional income is one of your surest bets to financial freedom.
We need money to be able to live dignified lives. Even the Bible says money answers all things. The amount of money that will give you financial freedom is different from mine. Set some financial targets for yourself and include some timelines. Try cutting your expenses by drawing up a budget and sticking to it. Food is one of the biggest expenses on everyone’s budget. Choose cheaper and healthier food options. You can try buying foodstuffs and groceries in bulk and others at wholesale price. Try cutting wastage by reducing the quantity of food to be thrown away after eating. Manage your usage of electricity and water. Remember, utility bills are consumption-based; you pay more when you use more.
Transportation is also very important in everyone’s budget. Choose cheaper transport options by driving a car you can effectively manage or use public transport; ‘trotro’ instead of expensive choices like taxis. You can set off early from home and pay less for ‘trotro’ rather than take a taxi because you are late and pay more. It is equally important to have some health insurance in place for contingencies. We can get financially independent when we work at it. On your mark, get set, ready? Go! See you soon at the destination of financial independence.
>>> the author holds BSc, MBA, GSE Cert. and a CA Ghana (Student Member). She is author of Start Right- A guide to financial investments in Ghana; Stepping up your Life. Email Address: [email protected]
Disclaimer: Views expressed in this article are the personal views of the author and does not reflect the views of the organization she works for.