Financial freedom is not so much about an amount; it is about thinking about your savings and investments as your ticket to a life where you can make your own decisions. We hear a lot of talk about financial freedom. But what does it mean and is it even possible to have enough money? Let’s talk about this not in terms of budgets and expense tracking, but in terms of how you think about money.
1. The first thing to understand, is that your money thoughts and beliefs determine how you deal with money.
For example, if you believe that you don’t deserve a good life, you will do things that make it impossible to grow your money. This could be taking out another loan instead of trying to spend less, or buying stuff you cannot afford so that your friends and neighbours will admire you.
What you can do:
- Write down your earliest money memories.
- Think about what it taught you about money.
- Look for the ways in which those money lessons still play out in your life today.
- Keep the good habits and change the bad ones.
2. The second mindset is how much versus how long.
Many of us believe that if we earned a bigger salary, all our money problems would disappear. We also believe that there will always be more time to do money differently. Both beliefs are wrong, and both work against you. Time is the most powerful force when it comes to saving and investing. How much you save matters less than how long you don’t touch your savings and investments. This is because of compounding interest, or interest on interest, which increases your money without you doing anything.
What you can do:
- Never cash in your pension. The longer you leave it to grow, the bigger it will get, and the most growth happens right at the end.
- Open a tax-free savings account and save R36 000 in it every year until you have reached the lifetime limit of R500 000. That will take about 13 years. Then leave that money for as long as you possibly can. So, instead of spending your annual bonus on a holiday or paying off debt, put it into a tax-free savings account and forget about it.
3. The third mindset is how much is enough money.
The answer is different for every person. It can be very difficult to come up with a number; instead, try thinking about it in these terms: it is enough money to do what you want, when you want, with who you want, for as long as you want. This means that you see money as the thing that gives you control over your time and flexibility in your life.
What it means in practical terms:
- You can choose to spend a weekend with your family instead of working overtime.
- When you want to take out another loan, the thought that you are giving away your control and freedom can help you to rather change your money habits so that you don’t need debt to get to the end of the month.
