THE 1ST BASIC SECRET TO FINANCIAL FREEDOM

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Status: In Progress  |  Genre: Personal Finance  |  House: Booksie Classic


...An expository write-up of the secret behind building wealth from the grassroot via the power of compounding !!

Submitted: June 03, 2018

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Submitted: June 03, 2018

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In a world full of uncertainties, mankind seem to be questioning their purpose for living... humans seem to have lost touch with some of the grassroot solution to their problems.
In a world particularly filled with so much financial insecurity... the average man's standard of living has only deteriorated with the passage of time. Its therefore understandable why there is a sincere and urgent hunger for solutions. ...real practical and workable solutions. Unfortunately though, some of these solutions lack the simple basis that can get them to work.
For clear reasons, the underdeveloped and less developed nations have been the worst hit, with Nigeria also at the forefront of all impact.

With an estimated population of over 200 million people, a non proportionate growth in GDP and a still high inflation rate, it makes sense to see why the average Nigerian has had to 'suffer'. Add that to the many economic and fiscal policy flip ups from our leaders, and you'll also see why things have virtually gone from bad to worse.
Many Nigerians are industrious in nature, so they struggle.
But for several reasons, largely due to structural deficiencies in our system, the gap between the rich and the poor has continued to widen. The poor and average Nigerian, especially the low income earners have seen their hopes shattered over long periods of time. Yes they may be working hard, but hard work does not always translate to success. This is particularly true with the Nigerian entity. ...and so even with greater effort, most citizens can only barely manage to eke out a living.
What then is the solution? you may ask. ...or put in a better way, how can the average Nigerian breakthrough from the shackles of financial difficulty?
To better answer that question, we need to look at certain spheres of the Nigerian system. ...the civil and entrepreneurial world.

In the civil world, most civil servants are devoted to their jobs. Most work for so many years with little or nothing to show for it. In this part of the world, there seems to be a strong disconnect between effort/input and output and how they relate to success. (I'll stop here, so it doesn't get too lengthy)
The other day, I heard about a man who after working for 38 years, couldn't get his pensions and died while struggling for it. This happens virtually every now and then.

In the entrepreneurial world, the average entrepreneur seems to have lost touch with reality. No thanks to the difficulties associated with setting up and succeeding with a business enterprise in Nigeria. Even when the entrepreneur tries to create the needed balance between their business and risk, the system presents an even bigger risk that tend to disrupt that balance and kill the business over time. It's no longer a surprise that Nigeria ranks far low at the ease of doing business index rating.
Most businesses here tend to have a lifespan of less than 5 years.
There are very few entrepreneurs that manage to break even. ...only just a handful of them.

So how then can one breakthrough from the weighty challenges within the Nigerian system? ...or better put, just how can an average Nigerian be free from financial insecurity?
There are 2 workable ways;

1] By looking inwards to access and start off that breakthrough from within your means.
2] By looking outward to see how u can benefit from 'betting against the system' whenever the opportunity presents itself.

I call them the 2 efficient grassroot steps to financial freedom !!
For this article, I shall only concentrate on No 1. (No 2 shall be discussed in a subsequent article)

As highlighted ealier, most average Nigerians struggle so hard but often times can only barely manage to eke out a living.
But in all sincerity, the struggle wouldn't have been for so long if they had done things right. If only they had done certain things differently, then their struggle would have just been for the short term. In the long run, they would have been better off for it.
Since the Nigerian system and those leading it have failed to create the enabling environment that can help give u that 'added push' to breakthrough, you can of course help yourself !! ...afterall heaven they say, help those who are willing to help themselves.

So how can one access and start off their financial freedom by looking inwards?
Quite simple; By always living within your means, imbibing a cost cutting measure, saving the difference and been disciplined enough to allow the power of compounding to take care of the rest.
Here are the practical steps u need:

Rule No 1: Learn to live below your monthly income as soon as  you start earning. ...take note of the clause 'as soon as you start earning'.
This is extremely very important. Because unless u do this, u will most likely continue to struggle until u retire from that job, business or whatever u do.
As a success rule;
- Learn to live a simple and humble life while remaining committed to the task ahead. ...and for as long as u are disciplined, u shall conquer !!
- Always resist and avoid completely the urge to borrow no matter the circumstance. Especially when such debt is for the purpose of financing consumption.
Ideally, the only debt you should take is a mortgage loan if u wish to own a home.

Rule No 2: Save, save more and continue saving.
The 1st step to succeeding in this is to cut cost accross all borders of your earnings. This is very very important. Remember; u can not save what is lost from excess spending, so u must cut down on your expenditures. As a guide, limit all expenses strictly to your need (only real need), and never spend on your want.
As a success rule;
- Open a dedicated savings A/C and always set aside at least 10-20% of whatever u earn monthly. Then be disciplined enough to keep increasing that % as u earn more. Do not increase ur expense line. Maintain or reduce it as u earn more. That way, there will always be more and more difference for u to save.
As u save and save more, u will be shocked at what u would've acheived within a short space of time. These days very few people are aware that it actually takes just 2 years to become a millionaire if u can consistently save just N2,000 from your income line daily. ...and oh yes u heared me right when I said millionaire !! It could even be more than the actual estimate if u invested some of the savings proceeds for extra returns within the 2 year timeframe.
The power of compounding is just so strong that it can make u financially free even before u say Jack Robinson !!
- Automate your savings process by calculating the exact amount of your set aside % and have an exact day (either weekends or month ends) during which u will be crediting your savings A/C. ...and ensure u adhere strictly to it.
One way to achieve success is by having a 'standing order' with your bank.
- Never withdraw money from your dedicated savings A/C.
One way to achieve success is by ensuring u do not have an ATM that's linked to the A/C. ...that way, u won't be tempted to withdraw from it unnecessarily.
- Set up an emergency A/C that can cover at least 6 months of whatever amount you earn monthly. ...and if u are a civil servant or active entrepreneur, contribute any additional leftover towards your retirement savings plan. One way to do this is via a pension scheme (by opening a pension savings A/C)
Note that if u are a civil servent/employee, u may already have an active pension A/C that's linked to the gov't agency, company or firm u work for. However, u can still save more. The idea is to work towards increasing your pension savings via additional contributions. (contributory pension)

Rule No 3: Invest with the proceeds of your savings but do it wisely by taking calculated risk.
There are plenty of asset classes that u can invest in;
- Fixed income asset; these are mainly investment platforms with short term maturity of a year or less like T-bills, time deposits and commercial papers. ...and the ones with a longer term maturity of usually 2-10 years like coperate and government bonds. Depending on the one u decide to play, a few of these asset class of investment are risk-free. However, they all have a fixed income/interest that u can earn when u invest in them.
- Equities; these are basically shares of quoted companies of an exchange. Ideally, u become a part owner of the company when u invest your money in them via a stockbroker. ...you get a proportion that's equivalent to the amount u invested.
Like fixed assets, u could also make some income/interest via capital appreciation and dividends. But unlike fixed asset, they tend to be riskier, and so would require you to have some basic knowledge before playing it.
- Real estate; these are investments in properties where income/interest can be earned via rent or sale.
It is however advisable for one to 1st own their own home before investing to make money from real estate.

Rule No 4: Always keep records of all your assets and liabilities. This is very important. So at every point in time, u would have a clear reference to know if you are actually progressing or not. This will help u spot areas were u need to improve on as against the areas u may also need to work on curbing down or even cut off completely. This way, u can ascertain to what extent you've made progress.
One way to achieve success is;
- By having a personal balance sheet ...more like a note that records your strength and weaknesses by comparing your income and expense line. Simply put, its a note that tells u how efficient u have been over time.
Your balance sheet can be referenced monthly, quarterly or yearly.
I however advise that u do it monthly, especially when u are at the early stage.

Rule No 5: Always make simplicity, humility and commitment your best friend.

Rule No 6: Never forget rules No 1 to 5.


Finally, these rules might sound easy, but they are actually not that easy.
However, If you can be disciplined enough to follow through with them and remain committed to seen it to the end, then I can assure you that you are on your way to achieving financial emancipation. ...real financial freedom.
In the long run, you would look back with immense joy and gladness and remain forever thankful to this article !!


I wish you well in your endeavour !!


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