Financial freedom is the status of having enough income
to pay one's living expenses for the rest of one's life without having to be
employed or dependent on others.
If a person can generate enough income to meet their needs from sources other than their primary occupation, they have achieved financial independence, regardless of age, existing wealth, or current salary. Financial independence also means being able to overcome your psychological fears to truly live free.
As you get older and are saddled with individual and collective responsibilities, the quest for financial independence is let loose. You begin to ask yourself questions like “how do I pay my rent? How do I pay for that dream wedding?, how do I pay for my children’s school fees?, how do I pay for my vacation?, how do I get all the good things in life that I need and desire such as a nice house or car?” All these thoughts can hit you in a way that might be scary, especially in light of your current income and other realities. But there is no need to fear because there are ways you can better manage your finances and improve your quality of life, while living within your means.
Too many people have gone through life without a firm plan and then find that there are more years of life ahead of them and no money to fund it. The good news is, that you can start making changes today that will help you along the journey to independence. However, you would need to make some drastic changes.
The first one is admitting you need money.
This sounds simple but it’s a great deal. As many prefer to shy away from talking about it, it is never a good idea hiding what you are born with. Every human is destined to crave for convenience. Money buys some comfort. And to deny such is to be ashamed of how we are created. Nothing drives a man to success than a desire to succeed in anything. We must know this; it is a golden rule. Secondly, we must save money. The importance of developing a healthy savings habit cannot be overemphasised. As such, it is critical to build the habit of saving a portion of your earnings with maximum discipline. Having a savings culture can be hard, but it is not impossible. Savings provides the platform that allows you make other financial decisions at your convenience and provides a viable platform for making investments instead of simply leaving your savings in a bank account. Unless some of us have wealthy parents from whom we can inherit property that can fetch us fortunes, there is a need to save the little we have if we want to have a foothold in the financial world. If not, we can be impoverished forever. Let us kill that monstrous fear now and begin to save, possibly five to 10 per cent of money we have. That is how to get ourselves off the ground, even if we have no one to finance our ideas.
Also, we must suspend desires and buy only what’s necessary.
Benjamin Franklin said: “Beware of little expenses; a small leak will sink a great ship.” Most Nigerians live beyond their means of livelihood, believing, erroneously though, that money comes their way by accident and more will come. Well it does come by accident but goes by choice. Until we learn how to live below our source of income, most people will always have a lean purse. One of the reasons we spend so much money on “things” is to keep up with friends and neighbours. Most people cannot afford a mansion, luxury cars, expensive schools, designer clothes or fine jewellery, but particularly in a materialistic society like ours, many feel pressured to keep up appearances.
Learning to structure your lifestyle and living within your means might also be difficult particularly with peer pressure and demands from loved ones.
However, the benefits of staying out of the race to keep up with the Joneses and meet the demands of loved ones are enormous. Living within your means is a discipline that will require you to deny yourself of the urge to splurge on unplanned expenses. We usually write budgets but are unable to keep to them because we often spend on things we don’t really need beyond the fleeting satisfaction they give. It will take discipline to consciously spend less. Track your expenses to see where your money is going and cut out things you don’t need. You must be prepared to adjust your lifestyle and spending habits. Then, look for ways to generate additional income. What do you love that you are very good at? Can you monetize it? Explore opportunities that can earn you additional income. If you have been in business for a number of years, consulting is a good way to earn from your experience. Companies need support in many areas; from financial management, business strategy, HR, sales and much more.
Finally, give some focus to generating passive income.
Some examples include Interest from your bank deposits which offer a reliable, predictable form of income. Property is one of the most dependable assets when carefully acquired with professional guidance. It is a great source of passive rental income. The stock market has a good long-term track record, and many successful investors have built significant wealth this way. The right investments can ensure you get regular income from dividends or selling stocks that have appreciated in value. The truth is that every investment opportunity comes with risk so do seek professional advice.
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