For many Nigerians, the goal is to make and have enough money in the bank to buy that car, get that house, and live the ‘baby boy’ life.
Sadly, this dream is often cut short with the arrival of something totally unexpected like medical bills that come out of nowhere, a job loss, having to fix or buy another phone.
Here are the four steps to becoming financially free:
Have emergency funds
As mentioned earlier, having to spend money on unplanned needs will definitely stop you from attaining that financial freedom you seek. This is why you need to have a lifesaver called emergency funds.
As soon as you get paid or have some money, set aside as little as 5% for emergencies. You can start small but it is important to aim higher in order to have at least three months of living expenses in your emergency account. Once you hit this target, you can move on to saving six months’ worth of living expenses, and eventually 12 months of living expenses.
Having emergency funds means you no longer have to worry about your finances
Use the snowball method to settle your debts
Having debts, even just one, is enough to prevent you from achieving financial freedom. Constantly having to pay them off will definitely make your goal seem a lot more difficult to reach.
This is why you can’t afford to settle them without a plan. This is where the snowball method, popularized by “The Total Money Makeover” author Dave Ramsey, comes in.
By using this debt reduction strategy, you pay off debts in order of smallest to largest. You start by listing your debts, making minimum payments on all your debts except the smallest, paying as much as possible on your smallest debt and then repeat until all your debts are settled.
According to researchers for the Harvard Business Review, this has been proved to be the most effective strategy.
Have multiple sources of income
In order to become financially free in good time, you should try to have more than one source of income. The more money you make, the more money you have to save towards financial independence and security.
The most popular ways to generate more money include blogging, starting an online business, starting a profitable passion project, becoming a freelance writer, using your car(s) for ride-sharing apps like Uber and Taxify.
Stop living paycheck to paycheck
According to Chris Hogan, a number 1 national best-selling author, dynamic speaker and financial expert, “Building wealth is impossible if you’re living paycheck to paycheck. Give every dollar a name before the month begins, and track your spending throughout the month.”
You can stop living paycheck to paycheck and start working towards financially security by learning to spend wisely, budgeting, investing (making your money work for you) and living below your means.
The path to financial freedom is not a get-rich-quick strategy. Its filled with a lot of planning and responsibility but it is definitely worth it.