5 Rules For Financial Freedom

5 Rules For Financial Freedom

Although success means different things to different people, I think everyone will agree that we all want to be successful. Part of being successful is achieving financial freedom, and I believe this too is a factor that’s common to everyone.

Notice I said financial freedom. At the most basic, financial freedom means you have resources to pay your living expenses, without worrying or having to depend on someone else.

While travelling the world may not be part of some people’s definition of being financially free, at least everybody agrees that financial freedom includes not having to worry where your next meal is coming from, or worrying if the debtors are soon going to take your house or properties away.

Now that we are all agreed (to an extent) on what it means to be financially free, here are five rules you must follow if you truly want to be financially free.

1. Avoid Lifestyle Inflation.

What did you do when you got a raise at work? Did any of these thoughts run through your mind: I can now finally afford [insert whatever here]; Now, I don’t need to manage [insert another whatever] anymore; Since I now earn more, it should definitely reflect in my lifestyle.

Did your thoughts run along any of those lines? That is lifestyle inflation in action.

Or when you suddenly got an unexpected windfall, an unplanned bonus, or a gift. What did you do with it?

It’s a natural human tendency to shoot up our lifestyle to match a rise in our income. 

Sometimes, a person who has a high income can suddenly lose their source of income, and you would expect that they should be fine for a long time, given how much they were earning, but then within a very short time, it’s like they’ve never had money in their lives. 

Even the bible says a person who spends all he has is a fool.

2. Excel at what you do.

Doesn’t matter what you do, you must be excellent at it. After all, what is worth doing at all is worth doing well.

If you are truly excellent at your job, it will eventually impact your income, and your future prospects will also be positively affected.

The last time someone asked you for a recommendation for a service provider, who did you think of? What things about them influenced your choice?

3. Save!

This cannot be said enough. Save. Save. Save some more.

Have a certain percentage of ALL your income that you save, and stick to it no matter what. And to avoid temptation, as soon as you get any income, save that percentage first, before you do any spending.

There are many reasons to save, like an emergency (God forbid), or an investment that suddenly comes up and is sure to give you good returns.

Also, as a salaried employee, it’s a good idea to have at least six months’ worth of living expenses saved up, as we never know what the future holds.

4. Avoid Consumer Debt

If you live in a country like Nigeria where getting loans have recently become so easy, it is oh-so-tempting to just take out a loan. It feels almost like it’s free money, until it isn’t. The temptation can be very great, and I know this from personal experience.

Consumer debt is toxic because it’s easy to obtain and usually hard to get out of. The payments can be oppressive and the principal balances nearly impossible to pay off. Before you know it, you’re taking out a loan to pay off another loan. And don’t get me started on the interest rates!

If you can’t pay cash for it, don’t buy it. If you have to buy a car on credit (and most people do), always buy a couple of tiers below what you could theoretically afford.

The only debt that makes sense, in my opinion, is the debt that’s going to help you make more money than even the interest you have to pay.

5. Be Frugal, But Not Cheap.

Frugality is a good philosophy in life. There’s no need to keep up with the Joneses, because the Joneses don’t even know that you exist.

Many people feel like they need to live a certain way, have a certain lifestyle, because they think everybody is watching them and talking about them. This is called the spotlight effect.

But the truth is, you’re not that important. 

Every one of us is wrapped up in his or her own life, and we’re the main characters of our own stories. To everybody else, you’re just a supporting cast, an NPC sometimes, even.

However, frugal doesn’t mean cheap. Sometimes, it’s better to buy that $20 nail clip instead of the cheap, $2 one. Or a belt for N2,000 instead of N500. 

The rule of thumb should be on the utility of the thing you’re purchasing. If the reason you’re paying more is that the costlier option will give you more utility than the cheaper one, then it’s generally a good purchase. But if you’re paying more so that people may be impressed, then you should check again!

Samuel is an avid reader and a freelance writer, in that order. He fancies himself funny, but his friends regularly don't laugh at his jokes. I have been a student of personal development for several years, and I created this blog to share my knowledge with others and help them become better versions of themselves.

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