A seamless path to financial freedom

Sydney Sekese, CFP^® professional and member of the Financial Planning Institute

27 April is a commemorative day in South Africa. Freedom Day honours the anniversary of South Africa’s first non-racial election of 1994 and pays homage to the country’s liberation from apartheid rule, where the minority exercised prejudice political power over the majority of the country. This begs the question:  Is there a seamless path to financial freedom?

Financial freedom is personal and differs from one person to the next. A sound definition of financial freedom is the feeling of being without financial stress. With financial freedom, you have the independence to live stress-free. You know exactly what you can spend, are free to do what you want (within your budget), when you want and without worrying about financial consequences.

It is prudent to conclude that like political freedom, financial freedom is a journey and not a destination.  Suze Orman, who earned the reputation of the world’s favourite financial advisor; once said that financial freedom is about understanding and accepting the natural cycles of money as it ebbs and flows through our lives. This happens sometimes in harmony, sometimes in discord.

It is important to learn to accept that your own money will also have its ups and downs. No matter how carefully you plan. Even if you do every financial thing right, money like other living things isn’t always going to behave in ways you can predict. Sometimes you will have more than you expected, and at other times money will flow out and you will have less than you thought.

Let’s examine some of the examples that may change your money status. There may be a time when you have money invested in shares and the market goes down dramatically, similar to what we experienced last year. Suppose you suddenly inherit a valuable piece of property. You may be unfortunate and experience job loss through retrenchment. Another person may be fortunate enough to be given a surprise promotion. These transitions can be exciting, and often scary but they are all part of the natural cycles of life and money.

Stage	Profile	Description
Zero	Starting from the Bottom	We all start at stage zero, and some of us dwell here for a long time, some of us forever. We’re here when we are young and depend on our parents for support, or because you’re an adult, but you spend more money than you make.
One	Meeting commitments	At this stage, you are financially self-reliant. You are making more than you spend and while you may still have debt that you need to pay off, you are no longer adding to that debt.
Two	You’re stable	Your bills are paid up to date, and you’re free of high-interest consumer debt like credit card debt. Now you start building an emergency fund.
Three	Free of debt	Not all debt is created equal and it’s not all necessarily bad. Some people don’t consider this stage complete until they are completely debt free. Others are comfortable with low-interest rate debt like a home loan.
Four	Feeling secure	This is the first stage that you’ve achieved some degree of financial independence. Whatever income you are generating that is independent of your job (rental property income, income from investments) is sufficient to pay for your basic living expenses.
Five	Feeling free	At this stage work is no longer mandatory. You can decide to continue in your current job, you might cutback to part-time, you might start your own business, go back to school, or take a low paying job in a field you always loved but on whose pay wasn’t enough to live the way you wanted
Six	Emancipated	Now you can have some fun with your money. You can do the things you have always dreamed of without worrying about money or work.
Seven	Your cup runs over	You can afford your life, the life you want and have plenty of money as a safety net.

When you are worrying about money, feeling powerless over your finances and sorry for yourself, then money will not hang around you either. On the other hand, when you feel you are in control of your money it will naturally flow your way and you will become the money magnet that you want to be.

Financial freedom is a state of mind. It begins with your thoughts and behaviours. There are several behaviours that we can avoid to assist in the journey to achieving this freedom.   Listed below are some dysfunctional money related behaviours:

1. Using money as a mood changer – for example heading to the shopping mall and using “retail therapy” as a justification.
2. Hidden addictions – this includes things like gambling, drugs, internet addiction, latest gadgets, and eating out a lot.
3. Hoping to win a lotto – you might be living in fantasyland if you plan your life around this hope. The probability of winning is extremely low or impossible.

A blog that I subscribe to recommends that you identify what money stage you are in and aspire to move from one level to the next without putting yourself under any pressure. Listed below are some of the stages that you may be currently experiencing:

Final Thoughts

The first step towards financial freedom is to take a step back in time to the earliest moments you can recall when money first meant something to you. When you began to see that money could create pleasure and could also create pain, fights between your parents, siblings because of longings and desires that could not be met because there was insufficient money. Financial freedom is your birthright and each one of us can be masters of our financial destiny.