Finances are an important part of life, that if managed properly will solve a lot of the issues we struggle with. If we learn how to properly handle our finances, we will never have to utter the words “I am broke”
One financial myth that needs debunking is this: if you save enough money, you can get rich or become wealthy. Here, “saving” means keeping money in a savings account or any other place where the money earns no interest. Though saving is very important, factors like inflation will erode the value of your money over time.
For this reason, investing is the way to go. One can choose to invest in the stock market, a business start-up, a mutual fund, some fixed income investment, or treasury bills at the very least, depending on your risk appetite. This way, through investment returns, you are increasing the value of your money over time. This is not to say investing is the only way to create wealth, but it is surely smarter than saving.
It is important to note that financial freedom does not come overnight, as it is with a lot of other things. It takes months, (if not years) of discipline, hard work, and self-control to fully attain financial freedom. The journey to financial freedom is a marathon and not a sprint, as such, you should not expect to be totally ‘free” in a month or two. In the short term, you should definitely be making progress, but know that if the good habits are maintained, positive changes would become apparent over time. Contrary to what a number of people might think, being financially disciplined is not a difficult task, but it requires training your mind and body to adhere to strict self-imposed rules. It is not comfortable in the beginning, but you get better at it with continuous practice. To assist in your journey to financial freedom, here are a few tricks that may be helpful to you:
- Live within your means
This is very important and cannot be emphasised enough. It should not be the hardest thing to do, and it definitely pays off. Assess your revenue and your purchase desires and determine whether or not you can afford to make that purchase. Just as the adage goes, “If you cannot buy it twice, you cannot afford it!”
- Set goals
Determine what financial freedom means to you, and make that your goal. Once you have a clearly stated goal, you will be able to put things into perspective and make the necessary supporting decisions. Your financial freedom goals (both long term and short term) should be specific, measurable, attainable, realistic and time-bound. With all your financial goals clearly outlined, you will not make off the cuff expenses. Instead, you will save towards that upcoming vacation, or that expensive purchase you want to make, or even for a loved one’s birthday. Your set goals will also help you understand your progress along the way.
- Always remember to pay yourself
Consistently put a set amount of money aside to save, invest, etc. and only spend what is left of it, as opposed to spending what you have at hand and saving what is left at the end of the month. To effectively do this, have a proper documentation of your monthly budget in the form of revenue and fixed expenses like bills, and make consideration for your saving/ investment stash.
- Always have an emergency fund
You should regularly contribute to an emergency fund that can be easily accessible. This fund will be something that you can rely on, when a rainy day comes. It will reduce the chances of getting a huge dent in your account when an unforeseen circumstance arises.
Financial freedom is a level of monetary flexibility we should all aspire to get to. It is possible to achieve if it we are hardworking, disciplined and innovative enough to find more ways of increasing the value of our money.
What has been shared in this article are not all encompassing, but they are definitely a step in the right direction of financial freedom.
By: Wendy Amartey
Financial Analyst
Bank of America Securities
