In the personal finance industry, F.I.R.E. stands for “financial independence, retire early.” For most people, the goal is to save and invest early in life so you can kick back a little and relax in your 50s or 60s. Financial freedom means that you get to make life decisions without being stressed about the effect it would have on your finances because you are prepared. You are in control of your finances instead of being controlled by them.
Most of us know that panicked feeling that rips into your stomach when you see the bill for an unexpected car or house repair. You get stressed out when you think about how you are going to pay for that. But what if a car repair was just an unpleasant inconvenience? A week later you’ve forgotten that it even happened! That’s how little it affects your financial situation. It’s not an emergency, just a little bump.
Maybe your company is issuing pay cuts as a result of the pandemic. Instead of wondering where your family's next meal will come from, it's just an annoying event for you (because no one likes taking less money).
Do you feel that sense of relief? That’s what financial freedom feels like.
The path to financial freedom isn’t a quick or easy road. Having control over your financial health is the fruit of hard work, sacrifice and time. Thankfully, the effort is always worth it.
If you are ready to learn how to build a life of financial independence for you and your family, you can start by defining what financial freedom looks like for you.
Financial independence is personal. Be specific about your goal.
When you imagine yourself as a financially independent person, what do you see?
Does it look like:
Freedom to choose a career you love without worrying about income?
Freedom to take an international trip every year without getting chest pains?
Freedom to pay cash for a new designer handbag every month?
Freedom to buy 50k worth of suya daily and distribute among your neighbours?
Freedom to retire a whole decade early?
Are you ready to get fired up?
Then follow these steps to attain financial independence:
Step 1: Learn How to Manage Your Money
Not having a solid plan for your money is a sure recipe for financial disaster.
Give every naira a name and purpose before the month begins and track your spending throughout the month. If you always overspend or underspend in certain areas, you can always adjust the amount in each category.
Budgeting is important to get your finances on the right track, but it doesn’t end there.
You won’t achieve financial independence by mistake. Having a strict budget is the first step to building wealth.
To learn more about making a budget, see previous posts.
Step #2: Do A Financial Clean Up
Once you start learning how to manage money, you may realize you’ve made some mistakes with your finances in the past. That’s okay, we all make mistakes. But you have to clean up your finances before you can start building a solid financial foundation.
Step #3: Choose Your Career Carefully
The biggest tool in your wealth-building toolbox is your income. So when it comes to making a career decision, there are a lot of things at stake. Finding a job you enjoy that also supports your goals of financial security will help you enjoy the journey, rather than staying at a job that sucks the joy out of you.
Here are a few things to keep in mind when choosing a career:
Where do you want to be in 10 years? Are there opportunities for professional growth? Do you enjoy the work? Find something you’re passionate about that allows you to use your skills and talents.
Your career choice can have a big impact on your financial health, so take it as seriously as a heart attack!
Step #4: Create An Account And Strategy For Short-Term Savings.
Imagine if you had to pull money out of your retirement account when your television requires repairs. You won't grow quickly if you keep borrowing money from your future.
In order to achieve financial freedom, you need funds to cater for common, unexpected life events like car repairs, spoilt appliances and medical bills. That’s why your emergency fund should be able to cover 3-6 months worth of living expenses. This would act as a buffer for any emergencies, give you peace of mind and a little more flexibility. Now you can buy that expensive seafood platter without feeling any guilt!
Also, you’ll need a savings plan for big purchases that aren’t emergencies. For example, an exotic trip to the Maldives. With a full emergency fund and a plan to cover big purchases in place, you now have the financial foundation to start investing.
Step #5: Learn About Your Investment Options
The good news is the sooner you start investing, the more time your money has to grow. Here’s how to get started:
Apart from your retirement account, which should take up about 10% of your monthly income, you should set aside some money for solid and low-risk investments. For example, I hear agriculture is a fabulous start. With the help of agricultural investment platforms like Farmsby, you can invest your money and get high returns while keeping your capital safe. Sounds good right?
Step 6: Track Your Net Worth
Measurable improvement is key to motivation when it comes to achieving your goals, so track your finances, see where you are improving and where you are not, tweak it and get back on the mill. For more information on how to track your net worth, see previous posts.
Step 7: Set Aside Some Money For Fun
Even the most frugal F.I.R.E. proponents agree that you can’t “live your best life” without having a bit of fun along the way. Have fun dears, you worked hard for the money and besides, problems are like bicycles, they always circle back. So, if you want to buy a full bucket of chicken, and use it to binge watch your favorite TV series, just do it.
Step 8: Why Do You Want This? Figure It Out
Now, this may sound like some kind of "aspire to perspire" talk, but research has shown that people are rarely motivated by money alone. If you’re struggling to make smart financial decisions, it could be time to figure out your “why.” Figuring out the reasons why you want to be financially independent and reminding yourself of those reasons will help keep you motivated on your journey.
Step 9: Be Active in Your Journey to Financial Freedom
Making the right investment decisions is the first step, but keeping up with your fund performance is crucial to getting the most out of your investments.
This is why we at Farmsby keep our investors informed on the progress of their investments by making it accessible on their dashboards.
Did you say we are very considerate? Why yes we are, thank you.
The idea of actively making decisions about your investments may feel overwhelming. If it feels that way to you, you’re not alone.
The joy and peace of being financially independent are worth all the hard work it takes to get there. You’ve got this! We support you! Like they say in Korean dramas, fighting!