Kickstart your financial freedom
Januworry is over and we can get onto a more even footing with our bank account again!
The new year started less than a month ago. While I am not a great believer in New Year’s resolutions, I do know that each new year allows us to reflect and make some real changes that will allow us to improve our situations – financial or otherwise.
I remember many years ago living in rented accommodation that was not in the best part of town. I was working in my first job and the property was an investment belonging to a family member. I had agreed to rent the property from her, as I needed an affordable place to stay and she needed a good tenant. However, it soon became obvious to me that this wasn’t the area that I wanted to stay in for any length of time. As the new year approached and I had been living there for two or three months, I vividly remember promising myself that I would not be living in the same place in a year’s time. And by the end of that year I had bought and moved into my own home.
What did I learn from this and why do I still remember it so well today? Well, firstly, the situation was so uncomfortable that I really wanted to change it. Lesson number one in life – we make our greatest changes for the better in times of our greatest distress. So the challenges of life often lead us to greater heights.
Secondly, I didn’t just ‘put it out to the universe’ as some whimsical, hopeful wish. I put a plan in place and took action to ensure that my position changed. This had a direct result in me achieving what I promised myself I would achieve.
These lessons can be applied in many aspects of our lives, not least of all in our financial situation. Many of us are uncomfortable around some aspect of our finances – we may feel that we earn too little, or we have too much debt, or we have been let down by others (such as an ex husband not paying child support) or perhaps it’s just that we find it impossible to save, even though we know it’s a priority.
To get on track and make changes that will lead us to financial freedom (which in my view is all about having choices around our time and money) we need to, firstly want it so badly, and secondly, put a plan in place to get there. Action is key. One can read a hundred self help books on money, but without taking action, it’s won’t make any difference to your life. So what steps can you take that will have meaningful end result?
- Take a long hard look at your money and the way you view it. Do you just spend when you get paid, are you disciplined, do you have a budget, do you value your income and do you make your money work for you (or do you work for your creditors?)
- List what is coming in and where it’s going – I call this a financial selfie. If your expenses exceed your income, there is a problem. If on paper, you have a surplus at the end of the month, yet you can’t save, there is also a problem.
- Based on this information, draw up a realisitic budget for your spending. You are now starting to put yourself in the driving seat – you are taking control of your money.
- A critical element of that budget is to commit to paying yourself first. Select a set amount (and it may be as little as R200), put a debit order in place and pay yourself along with all your creditors. Get advice from a professional financial adviser on where to invest.
- Tackle your short term (expensive) debt to bring it down to zero. Debt incurred in buying a home is fine, as you are growing an asset and you need a place to live. But aim to get rid of the credit cards, store cards, etc.
- Experiment with some new behavior. Don’t buy groceries for a week – eat what’s in your cupboards or deepfreeze. Don’t buy any new clothes for three months – this will halve the balance on six month accounts. Cook with fresh ingredients – much cheaper and healthier than processed or frozen foods. Reduce your entertainment expenses – entertain at home or start a supper club with your friends. There are many more examples that will help you cut down on your expenses. I would love to hear about them – drop me at email at email@example.com and share your ideas.
Financial freedom is a result of what we do (or don’t do) – you either set yourself free, or you remain enslaved – it’s your choice. I want to encourage you to take the positive road, make changes in your financial life, and then look back in twelve month’s time to see how far you have come. Keep moving ahead and keep focused on your goal – financial freedom and the choice of what to do with your time and money. It’s a wonderful feeling!