When some dream of financial freedom, they think it’s to do with owning luxury yachts and classic cars and frequently going on holiday. However, this is not true financial freedom if it is all funded by credit.
“Financial freedom is the ability to manage your money instead of letting it manage you,” says Brina Briggs, senior manager of 1Life Insurance.
National Debt Advisors CEO Charnel Collins adds: “In its purest form, financial freedom is the ability to make life decisions without worrying about the financial consequences.
You are able to afford the kind of life that you and your family desire because you have enough savings, investments and cash on hand. Also, with no debts, money in the bank and investments for the future, you’re financially prepared for whatever life throws at you.
So, it’s possible to have assets and holidays without being financially free. But is financial freedom, in its purest form, even possible in a country where most live on credit??
IS FINANCIAL FREEDOM POSSIBLE?
The short answer is “yes”, but, if you google the success stories, you’ll typically find that people took years to achieve financial success.
It’s not an overnight endeavour and financial advisers concur that anyone who tries to convince you otherwise should be taken with a pinch of salt.
Briggs says: “It all depends on how much debt you have and what you get paid as a salary. We’ve seen people come out of debt within two years or five years?
“Debt rehabilitation is typically a five-year plan to turn yourself around. You won’t attain financial freedom immediately after debt rehab, but I’d say after entering this, it can be done in around eight years.
“I’d say, overall, it’s doable in a decade if you have the discipline and can change your mindset.”
FINANCIAL FREEDOM IN A TOUGH ECONOMY
Looking at life through the lens of the ever-increasing cost of living, high inflation rate and few opportunities to increase an income, one might argue that financial freedom is impossible.
FinLink financial strategist Jason Garner says that, during these times, it’s important to check that your current circumstances align with your plans and adjust them accordingly.?
“For example, it is not the time to splash out on a new car or use our credit cards to enjoy life.
“Now is the time to be conservative with spending, cut back on luxury items and ensure we don’t overextend ourselves. When things improve, we can replenish our savings, continue to settle our debts and then spend on the nice-to-haves.
“Very often, the best opportunities come out of the most challenging times. The trick to a successful financial life is to be able to assess, adapt and action, depending on the circumstances one faces,” explains Garner.
HOW CAN YOU ACHIEVE FINANCIAL FREEDOM?
Financial freedom is a long-term journey that demands discipline, dedication and sound financial choices.?
Collins says that following these tips can help:
- Set financial goals: Identify your short- and long-term financial goals. This will keep you on track and enthused to actually execute them.
- Stay on budget: Set up a spending plan that accounts for your earnings, expenditure and savings. Wherever possible, stick to the budget and avoid unnecessary expenses.
- Create an emergency fund: Set a fixed amount of your monthly income to create an emergency fund that can be used to cover unexpected costs.
- Pay off debt: Avoid incurring debt, but, if you do, pay it off as soon as you can to save money on interest.
- Increase your income: Find ways to earn more money by exploring various secondary income options available or by finding a higher-paying job, starting a business or investing.
- Keep track of your progress: Review your finances on a regular basis and track your progress towards your financial goals. Stay on track by adjusting your plan as needed.
Get South Africa’s latest entrepreneurial or business success stories delivered right to your inbox — Sign up to Entrepreneur Hub SA’s newsletter today