To be financially free is not to be the richest person on earth. Rather, it is having the disposition to make money decisions as you deem fit. In other words, it is being able to control money as oppose letting it control you. To achieve financial freedom, you need to ascertain your current financial state and set goals as required.
Here are the best steps to follow to achieve Financial Freedom:
- Ascertain your current financial standpoint
The first thing to do is to determine where exactly you are financially. You need to know how good or bad your finances are in order to change it. Calculate your net worth by subtracting your debts from your assets to determine where you stand.
- Draft a Financial plan
Calculate all your expected income and net them asides with your expected liabilities. Next, draft a plan on how to save and invest your money. Try to eliminate any future debt obligations and reduce all unnecessary spending. Use a budget to determine how your money would be spent and do all that’s within your power to follow it. Also try to say ‘No’ to unnecessary giving or lending to avoid running after people when there’s a financial crisis.
- Plan for contingencies
Contingencies may arise any time and they could completely eat into your plan if they weren’t considered in the first place. You don’t want to go borrowing when a family member gets ill. A great way to plan for contingency is to have insurance plans on all valuable items. Another way is to set aside an account that can only be assessed after a period of time. It would yield interest if you put it in a fixed deposit account or in the nation’s treasury bills. Make plans for your children’s education even before they grow up and set up a retirement plan, so you can achieve financial freedom with or without a job. These things need to be handled proactively or they will nip you in the bud.
FinanceFriday – How to Calculate Your Net Worth
- Invest your savings
Emphasis needs to be placed on savings as investing is always a better option than saving. This is because of the time value of money. The value of ₦500 today is much less than that of ₦500 tomorrow. Hence, if you put the money under your bed, you would soon realise that it is not worth as much as it should be. In other to invest and still have your capital, invest in a risk-free interest yielding asset like the treasury bills. If you can take a few risks, invest in riskier assets like properties or shares. If you are not sure what you invest in, however, it is advisable to speak to a professional first.
- Set goals and commit to them
Being financially free is a choice. As such, it doesn’t happen by chance. You have to set goals and ensure that you have the right plans in place to achieve them. Be proactive about your finances today and life would be much easier for you.
