Personal Financial Freedom

PERSONAL FINANCIAL FREEDOM

Earning a living in Africa has been described online as an ‘extreme sport’. Most markets are very competitive meaning that companies are becoming more and more frugal in an attempt to not only survive but also demonstrate growth. Where does this situation leave you as an entrepreneur or employee? In most cases companies aren’t able to compensate their employees above the industry standard, so for the average employee, every cent counts.

The cost of living is steadily increasing but very few employers are adjusting their compensation to match the rate of inflation, which means, that same cent you’re spending loses is losing a bit more of its purchasing power while having to do a lot more. In a situation like this financial freedom seems like myth. Financial freedom is a goal that everyone wants to achieve but instead of looking at financial freedom as a destination think of it as process.

1. Define Your Goals & Establish Your

Timeframes: Some people save because it’s good tohave a rainy day account. Others save to purchase an item that they want whether it’s a flashy sports car or the dream vacation/wedding or starting a company. Regardless of your goal, you need to be honest with yourself about how attainable they are and the steps that you’re willing to take to achieve them. First of all the goals needs to be realistic and attainable meaning that pursuing these goals will not disrupt the necessities that you would need to function. Having realistic financial goals will allow you to perform optimally and without unnecessary pressure.

Once you know what you’re saving for, you need to set a possible timeframe within which you hope to achieve the said financial goal. This action roots your goals in reality and allows you to think critically about them. If you need to have a given sum of money in your savings account within the next 18 months you start to ask yourself questions like ‘will savings from my salary be enough to achieve this?’ ‘What other revenue streams could I use to get to my goal?’ and so on.

2. Actively review your spending habits: “Take care of pennies and the pounds will takecare of themselves.”

Getting to know your spending habits is good next step. You need to be honest with yourself for this to really work. A good exercise, that we recommend, is to note every single one of your expenses for the duration of two weeks, no matter how small. At the end of the said week take a stock of everything you’ve been spending. When done for the first time it can be a sobering experience because it wakes you up to all the unnecessary things that you spend money on. You could decide to carry on as usual or you could try to slowly cut back on these frivolous expenses. If you choose to cut back, do not do it all at once. Shed these habits one by one. I mean, stop impulsive spending. Try and have every single purchase rooted in ‘need’ not ‘want’. If you see something that you really want to buy, put

in probation for about 5 days. If at the end of this period you still need it then purchase it. It’s the little things like these that matter the most. Things like carrying a packed lunch and eating out less often are encouraged as well. If you’re willing to take things a step further you could save the small amounts of money that you would have spent on the foregone activities and before you deposit it as part of your savings at the end of the week or month, use about 10-20% to treat yourself. A bit of positive reinforcement helps to make the financial change of pace easier.

3. Get your safety nets in place: Asyou save it’s prudent that you consider how unpredictable life is. A random event could end up making you empty the savings account that you have worked so hard to create. A smart and safe move is to assess your risks and figure out how to protect yourself from them. Insurance premiums can be a nuisance, but you’d honestly rather have insurance and not need it than need it and not have it. There’s also a peace of mind that comes with having financial security and safety nets.

Another safety net to consider, though this is not for everyone, is additional revenue streams. If there is something that you’re good at that has the potential to be monetized or see a venture that you comprehensively understand and hope to support it, you could go ahead and invest. Multiple streams of income offer financial security, and the chance to achieve financial goals ahead of schedule. They also provide enough of a financial cushion in case you need to withstand any shocks that may be caused as a result of delayed payments or defaults.

4. Constantly review and re-adjust: Asyou change and grow so does the nature of your priorities and expenses. It is up to you to evaluate your expenses regularly and determine which expense is valid and which is frivolous. This process or different versions of it is an ongoing pursuit and if meticulously done could offer financial freedom.◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊