Ten vital steps towards financial freedom

A lot of people are caught off guard by retirement or retrenchment mainly because they do not work towards financial independence, which occurs when you have enough to live on without having to work every day. While it sounds hard and elusive, financial self-sustenance is attainable. Nailantei Norari looks at a few tips to start you off on that journey.

1. Set goals

If you have nothing to aspire to, you are not in a position to explore all your potential. It is therefore important to have clearly outlined long and short-term goals and their financial connotations.

Breakdown the goals into actionable steps and see what it will take to achieve them, then dig in and do the work. If you plan to better your parents’ lifestyle, see how much it costs to build a stone house and how much money is needed, then start working towards your goals. The clearer the goals, the better.

2. Budget

Learn what you spend every month and every year by tracking your spending. This will allow you to see where your money goes. Once this is done, see what expenses you can cancel off and the ones you cannot live without.

Make a budget and stick to it. This will ensure that you have a bit of left-over money that you can channel towards your other goals.

3. Pay off debts

Try to live debt-free if you can. If you cannot, ensure that you only have good debt. Good debt can increase your net worth, while bad debt strips it.

Taking a Sacco loan to pay for a piece of land is good debt. Taking a loan to buy a car or a round of shots for your girlfriend or friends is bad debt.

If you already have bad debts, start paying them off. This will ensure that you are working for yourself rather than for other people.

4. Boost your income

You can only decrease your expenses to a certain extent. In order to achieve financial independence, you need to be able to boost your income.

You can do this by starting a side hustle or getting hard and soft skills that will enable you get a promotion or optimise your business.

Just do not leave money on the table. If you can start a YouTube channel or do social media marketing, do it and earn a few shillings on the side. Have an eye for opportunities and ensure you leverage them.

5. Adopt minimalist lifestyle

While it is important to love yourself and spend your hard-earned money, it is also important to live a minimalist lifestyle. Ensure that you live within your means.

Borrowing to finance a flamboyant lifestyle is a sure-fire way of remaining poor, as you will be working to pay off the debts rather than to advance yourself.

If you can walk to work, walk, do not take a cab. If you can cook, do that instead of ordering a meal. You do not have to invest in the latest designer wear. All the wealthy people started off and still live minimalist lifestyles.

6. Save

Put away some of your money. This ensures that you have something for a rainy day. There are two types of funds that you should have; emergency funds and sinking funds.

An emergency fund is a pool of savings for the unknown. This should be at least three months of expenses. A sinking fund on the other hand, is a pool of savings for a known goal.

This could be a water tank for grandmother in the countryside or a new car. Practice financial discipline such that you do not remove your savings for a banal reason such as painting the town red.

7. Invest

While saving is a good place to start, you need to invest, especially since inflation eats in to your savings. Investing is making your money work for you.

If you for instance invest in good stocks, you will be earning dividends for a long time to come without ever having to break into a sweat.

However, research before you invest in anything. Investing in something you do not know is a fool proof way of losing your money.

8. Gain financial literacy

While being money-wise is not something we were taught in school, it is a skill that every adult and child should have if they plan to become financially independent.

Luckily, the internet is a useful resource that we can leverage. Use YouTube and other social media platforms to get literacy on finances. You can enrol in professional financial literacy courses or simply hire someone who is financially literate such as a financial advisor.

9. Contribute to statutory plans

If you are employed, ensure that your employer contributes to statutory plans such as the National Hospital Insurance Fund (NHIF) and National Social Security Fund. These payments will come in handy when you are sick and when you retire respectively.

If you are not employed, ensure you pay your NHIF plan, as there are numerous ailments that the plan can pay for you. Either way, remember to save for retirement because health bills normally skyrocket during this period.

10. Invest in yourself

Invest in getting the hard and soft skills needed to advance in your chosen career or business. Do not get too caught up in looking for money that you forget to take care of yourself.

Health expenses run deep. Therefore, eat healthy and workout as this will leave your money intact. It will also ensure that you are in tip-top shape to enjoy your financial freedom.