Seven ways to be financially free

 

1.      Calculate your monthly expenses

This should be done on paper. Divide your monthly expenses into two categories; fixed and recurring expenses and non-recurring expenses.

Recurring and fixed expenses are those that we have to pay monthly, and that we can determine before they are due. Examples of recurring expenses include rent, electricity bill, water bill, TV subscriptions like Netflix, airtime (postpaid or prepaid) and Internet expenses. In addition, fares to work and food expenses could also fall under this category, as you can predetermine the two.

Non-recurring expenses are the irregular and non-predetermined expenses that you find yourself spending on. Such include medication, clothes, offering, welfare, furniture, electronics etc.

2.      Have a budget

After having the monthly expenses written down as we saw above, the next important step is to have a budget. This is simply setting aside money for every expected expense before the expenses fall due.

A budget gives you a clear picture of where your money goes. It also serves as a determinant of whether the amount of income you currently have matches or can sustain, the lifestyle you currently have or want.  In most cases in the journey of financial freedom, we find out that our expenses might exceed the income that we have. This is basically what financial freedom solves as you can freely spend your cash knowing you are on a budget that keeps you within a healthy range of spending.

When budgeting, you can minimize or do away with unnecessary expenses. You would find out that some habits like eating out, take a large chunk of money, compared to cooking the same meal for yourself. Opting for cheaper transport e.g. commuting via a train instead of PSVs or a PSV instead of a taxi would save some money too.

Note: An important factor while budgeting is to budget for savings first as you get to other items in the budget. According to Grant Cardone, a serial investor and a social media marketer, in the pursuit of financial freedom, one should keep/save 40% of their income that would later be used for investments as it reaches a certain target. This means that if you were making KES 30,000 gross income, KES 12,000 should go into savings after which you can budget for the rest. With the KES 12,000 being kept aside monthly, you would then aim to hit a target of, say KES 300,000, after which you would set up an investment like in Real Estate, Cryptocurrencies, Agri-business, Stocks, Bonds, or name your favorite.

3.      Do an Income Producing Activity Analysis

You now have your expenses broken down and a budget that seeks to keep the expenses at a minimum, so that you can match your income with the expenses. Remember, you don’t want to have a budget that doesn’t fit what you have. But then you may find out that there is this thing that doesn’t fit the budget no matter how bad you want it e.g. a set of furniture, that you really need to make your house complete. This is where analyzing your Income Producing Activities (IPAs) comes in handy.

Do you only make income from one source? And are you having the best that you can from that source? You may realize that your IPA is not capable of sustaining your financial goals; that’s a red flag and a call for change. This means that you would need a second income or side hustle to kick start you into financial freedom.

Investments that make you money passively are ideal for a second or third IPA. Passive income is simply where your money works for you. Such include Real Estate, Stocks, Network Marketing, and Cryptocurrencies, just to name a few. To get started in Cryptocurrency mining and Airdrops get more here.

4.      Have a Saving Strategy

Remember the 40% you ought to put aside from your monthly income? That will need a lot of discipline to install and make it a habit that doesn’t strain you. Well, it’s going to be tough in the first days, but once you’ve made it routine, it’s no longer a strain. Les Brown says, “If you do what is easy, your life will be hard. But if you do what is hard, your life will be easy.”

Some of the strategies that would let you save up to significant targets include, joining a Chama or SACCO where you would contribute weekly or monthly. A Chama is a table banking group where members contribute in a regular and agreed period of time say daily, weekly or monthly and the raised money is given to one of the members. The process in the Chama repeats until all the members have contributed. Such groups also join hands in welfare in case one of the members has a welfare need. SACCOs are cooperative organizations that allow members to buy shares and accumulate savings from which one can afterwards make yearly dividends and also access loans depending on their shares and savings.

Another great option for saving would be having a Life insurance policy that allows one to save for long-term goals by contributing monthly and also get to enjoy protection benefits. These protection benefits include compensation in the case of critical illness diagnosis, permanent or total disability, or even death. Where such events occur, you or your family get compensated, the monthly premiums you would have been paying is waivered and you still get your savings target. Your money earns a percentage bonus each year in the process. Insurance saving policies also allow you to get tax refunds and also give access to policy loans, which would be a big plus in your journey to financial freedom. Hit here for more information on the same.

5.      Eliminate and avoid Bad Debt

There is good and bad debt. Good debt is where you won’t struggle to pay, while bad debt is that which you really hassle to pay. A bad debt example would be a mobile app loan that you take for Non-income Producing Activities like partying. Bad debt often finds us in defaulting where the debt accumulates high-interest charges or penalties for late payments. Good debt would be like a loan to boost a side hustle that is faring well.

Note that, when a debt to finance an Income Producing Activity is good debt, debt is not recommended to start a business. Start-up capital ought to be strictly from savings e.g. the 40% of monthly income you will be saving as we saw above.

In the case that you are already in bad debt, the 40% savings ought to be divided where, according to the interests accumulating, you can give a priority to the debt e.g. channel half of the saving funds to take care of the bad debt. You can also talk with your creditors to see if they can waive any late penalty charges on such debts.

6.      Build your credit score

Building your credit score is critical in growing your financial portfolio and net worth. Generally, financial freedom, especially when starting from scratch, would need you to use borrowed cash to hit significant milestones.

Most of us find ourselves listed in Credit Record Bureaus for defaulting. This has more escalated even more by the numerous mobile app loans that are available currently. To attain financial freedom, you may need to check if you currently have unpaid mobile app loans that you may have forgotten about. You can follow the steps here, to check your score.

The next way to build your credit score is to make use of your saving accounts, after which banks or financial institutions vote up your score in Credit Bureaus.

1                7.  Set goals and invest in yourself

Setting goals is essential to every aspect of life from sports, education, implementing projects, etc. Goal setting is equally important, perhaps more important, in financial freedom. This would be a repetitive process in which you seek to see yourself in both the short term and the long term future.

Setting goals involves seeing yourself in the next one year, five, twenty, or forty years. What kind of life do you dream of living then? What milestones would you have made? What kind of house would you be living in? What kind of transport would you be using? Such questions will help you visualize your goals, and indeed, it’s the first step to begin creating the future you want for yourself. This would work well when done on paper, just as we began in the first point. You would then come to what you have now and put down a list of steps to get you to the goals you saw in your imagination.

Hand in hand, invest in yourself by engaging in personal development programs. Network Marketing or Sales and Marketing companies are a good place to start, as they often offer personal development programs. Reading personal development books like financial author books is a great tip too. Another great step would be to seek a mentorship program to know which areas you need to focus on to improve your results. 

Conclusion

Hurrah! There you have it. Seven super tips to financial freedom. All the best in your financial endeavours.

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