A famous proverb states that the borrower becomes the lender’s slave, and that’s a true story for those who are in serious debt.
As SA celebrates Freedom Day, why not take a look at your own freedom, the financial kind. Do you really understand what it means to be financially free, to be free from money worries? Financial freedom may mean different things to different people, but we all agree that to be truly financially free is to know that should your world crumble around you, that the last of your worries would involve money.
So, how do you achieve financial freedom? Boitumelo Mothoagae, Head of Customer Operations, Retention at Liberty and Financial Adviser provides eight easy steps to get you started on your journey to financial freedom.
Set Financial Goals
Any trip requires a map with directions, and a start and end point. The road to financial freedom also starts with a map and it’s important to understand the journey you are undertaking and why you are doing it. Drawing up a plan detailing how you will pay your debt off or invest, requires a plan.
Get out of debt
This has to be a conscious decision and one made in the planning phase. Your plan should outline the ‘bad’ debt you plan on paying off first such as clothing accounts, credit cards, overdrafts etc. Your plan should also include the order in which you will pay off your debts as well as when you will start and complete this. Start paying smaller amounts off first as this money can be allocated at a later stage to pay off bigger debts. Moreover, pay the debts which have a higher interest rate first and whatever extra money you have left over after paying off these amounts, use towards decreasing the longer-term debts you may have such as car or bond repayments. This will benefit you in the long run.
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No matter how much debt you have, start paying yourself first. An easy way to ensure that you keep to this promise is by opening a savings account that you don’t have immediate access to, and save monthly – even if it is just R100 for now. Place a stop order on the account that your salary gets paid into. This means that the savings amount that you have allocated will go straight into your savings account without you having access to that money. This way, while you are paying off your debt, you are saving, and as the debt is reduced, you are able to save more.
Do your homework
Before you invest your money in any investment that promises you an unrealistic and quick return, be weary. Good things come to those who wait. There are salesmen and convincing con-artists out there. Speak to a registered and accredited financial adviser regarding possible investment options and portfolios available on the market.