Do you know why you want to be financially free?

  1. Create a simple spending plan. First, take what you earn after tax, save and invest anywhere between 10–40% of after tax earnings (whether it’s 10% or 40%, the important thing is that it is something). That way, the rest can be spent without you feeling guilty. Try to create a budget and stick to it so that all your money has a place to go.
  2. Bring your debt levels down. Having debt means you’re subjecting yourself to a definite future interest expense covered by your current income which unfortunately isn’t certain. The sooner you pay off your debt, the sooner you can start putting money towards savings and investments.
  3. Automate, automate, automate. We can’t automate a diet, we can’t automate exercise but we can automate our finances. Your savings and investing amount should come off your accounts before you can even think about spending it. It might feel like you’re relinquishing control but what you’re actually doing is stopping yourself from being able to make a poor decision with that money.
  4. Live below your means. This one has a bit of a bad rep because we live in a consumerism dominated society. However, it’s actually about making small adjustments by distinguishing between the things you need and the things you want. Of course, you can still treat yourself every now and then, but distinguishing between the two makes it easier to focus on the needs, and spend less on the wants.
  5. Start investing now. In its simplest form, investing is about exposing your money to compound interest. The power of compound interest is quite frankly mind boggling. To illustrate its powers, if you had a choice between R3 million today, that couldn’t earn interest, and 1 cent today which doubles in value every single day, which would you choose? You might be tempted to go for the R3 million, but if you waited just 30 days, the 1 cent would be worth over R5,3 million. Mind blown! Before you get too excited though, when investing, this process is a bit slower, but the example illustrates that over the long term your money will grow exponentially.



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