It’s October 1st and the Chinedu and the members of his family are contemplating where to go and have fun. Every public holiday they make it a mission in life to have maximum fun no matter how it cost. However, deep down Chinedu reckons his days are numbered, if things were to continue like this and someday somehow he loses his 7 figures a month salary job.
Imagine a life where you earn a fat salary, live in a lovely apartment, drive a flashy car, have a posh vacation once a year, put your kids in the best school possible but still start every single month of your life broke with zero savings in your bank account. That is the sort of life he lives.
There is however an alternative to this sort of lifestyle. A lifestyle of financial independence or financial freedom as I prefer to call it. Financial Independence is a state whereby you have surplus cash and investments to cater for any eventually or need without having to worry about your feeding, healthcare, shelter, bills etc. and other everyday necessities of life. Not many can boast of this sort of freedom. It is one I hope to attain personally and will outline the steps I am willing to take to achieve it.
Have a steady source of income
This I believe is the very first step in attaining financial freedom. Without a steady source of income it is incredibly difficult to live above water. You can achieve this by getting a well-paid job or owning a sustainable business. This first step is a no brainer.
Alternative source of Income
Relying on your salary from Month to Month is a difficult task especially in a very dynamic economy like Nigeria. You must have an alternative income that should augment your current source of income. Think about it? Even the richest man in Africa doesn’t have one business.
Ability to pay your bills
You can’t be claiming financial freedom if you haven’t had your bills paid because you don’t have the cash to pay. Financial freedom comes with financial responsibility. Once you tick this box you are on the right track already.
Living according to your means is probably the most difficult part of attaining and remaining financial independent. Living frugal is relative in my opinion because what might seem a splurge to some may just be very important to others. The easiest way to approach it is to see living frugal as not spending more than what you earn. It is as simple as that. If you earn N100, 000 then don’t spend beyond N100, 000.
Have an emergency fund
For those who fear about what might happen to them if they lose their jobs, it is often advised to have an emergency fund in place. I like to suggest and emergency fund of at least your current six months salary. If you have this tucked away in the bank somewhere, then be rest assured that when the inevitability strikes you have a good buffer to absorb the shock.
Have a Pension Fund
When you attain financial freedom it makes sense to remain there until you leave this world for good. Therefore, one very good way of living freely when you retire is to have a good pension fund. The Pension Act has made this very easy for everyone as pension contribution is by force. However, you can increase this by instructing your employers to contribute more from your own end of the pie.
Have an Investment Fund
One crucial aspect of financial freedom is your ability to remain financially free forever. A good step towards that is by investing in something you do not own solely. I will recommend any of Treasury Bills, FGN Bonds Mutual fund and ETFs, etc. These investments can yield up to 9% annually and are a good way of preserving wealth for the future and even for the present.
Have Health Insurance
There can be financial freedom without being able to afford quality healthcare. Whilst most organisation have good healthcare plans for their employees as required by law, many startups and one-man businesses don’t have. If you work in a startup or a one-man business or you are an entrepreneur try to get a health insurance plan for you and your family. And even when you do have one locally, it is not a bad idea to explore having one abroad or an insurance plan with an international appeal. Remember health is wealth.
Own a home
Every human being on earth is expected to aspire to home ownership at some point in his or her lifetime. It is an important part of being financially independent. Whilst this is very important, remember a home is only a home and owning one does not mean you have arrived.
Have no debt
I left this last because I believe as you grow in life economically it becomes increasingly difficult to afford things without owning. Even if it is to pay your rent you still may need to get a loan. But nothing in life says you must owe forever. Financial freedom is being able to have no financial burden on your neck you can’t immediately afford.