In order to get yourself on the path towards financial freedom, it is important to remember some basics of wealth building that will serve you well along the way. These are not merely my views on the matter but are factors quoted many times by wealthy people including the world’s billionaires. Although I will, in due course, post in more detail on these basic principles, it is useful to list them here so that we can all learn from them.
Basic Principle #1: Maximise your earnings
This can be either through employment or through a business. It goes without saying that if you do not make any effort to earn as much as you can over the course of your lifetime, you will never attain the financial abundance that you so desire. Even lottery winners make the effort to buy the ticket and no matter how luck one thinks he or she is, they never expect to win a lottery that they never even entered. For the rest of us who do not expect our riches to come from winning a jackpot, we must strive to boost our earning power over the course of our productive years. While you may earn what you think is a pittance immediately after college, you should make an effort to excel at work, go back to school to increase your knowledge and actively manage your career so that your earnings increase steadily over time. If you are engaged in business, you must seek to grow your turnover so that your earnings from the business grow over time.
Basic Principle #2: Spend Less Than You Earn
This is a controversial subject for most but is also the one principle without which you will never achieve true financial freedom. Just as a case in point, statistics show that within five years of retirement, an estimated 60% of former NBA players are broke despite earning millions of dollars during their playing career. From a personal perspective, i also found that, despite my salary growing several times over during the course of my career so far, i was no nearer financial freedom 7 or 8 years into my career than i was on the day i received my first paycheck. The reason behind this is that my expenses grew along with my earnings such that in the event of a job loss i would be as broke as a recent graduate. This is the foremost principle that the authors of the best-selling book “The Millionaire Next Door” attribute the wealth of all the millionaires interviewed.
Basic Principle #3: Create an emergency fund
While it is important to save and invest, it is also critical that one keeps a fund which they can draw into in the event of an emergency. This can be loss of a job, serious incapacitation, major sickness of a loved one (e.g kidney failure requiring dialysis) or such other emergency that has the capacity to do serious damage to one’s financial health. In the event of job loss (as happened recently at Zain and other companies due to the global recession or corporate restructuring), such a fund can enable one to live their life as before (with some minor adjustments) without having to pull kids out of school or moving neighborhoods. The exact amount of emergency savings that one should have is dependent on one’s circumstances, with experts advising that the fund should be equivalent to 3 – 6 months living expenses. I am currently building my emergency fund and hope to have six months living expenses stashed away safely by end of the year.
Basic Principle #4: Control Your Debt
In this era of credit cards and easily accessible non-secured loans, it is easy to succumb to the allure of an easy life fully financed by debt. A graduate straight from college working at their first job can easily secure loans to buy a car, furnish his house and buy all the latest gadgetry (think iPods, iPhones, plasma TVs, home theater systems etc) that his/her heart desires. This, in addition to HELB loans from the Higher Education Loans Board, already incurred while in college would leave the youngster barely having anything left over after servicing his debts. Such a person will mostly likely be heard complaining that life is too hard for one to save a single shilling let alone plan for retirement. While not all debt is bad, uncontrolled high interest debt used to buy items that provide temporary happiness should be avoided if one is to build a solid foundation for wealth.
Basic Principle #5: Invest regularly
If one was to regularly put away a portion of their earnings into investments such as stocks, unit trusts, bonds, etc from the time they begin working and continue to do so throughout their working life, they would build a firm financial footing that will allow them to retire early if they so desired, educate their children without suffering sleepless nights, handle life’s emergencies calmly as they come and also live their sunset years without being a burden to their offspring financially. Obviously the amount available for investment early on in one’s career is little but the important thing is to begin and then slowly increase the level of one’s investments as their earnings grow.
Basic Principle #6:Spend your time doing the things that are important to you.
It cannot be overemphasised that the pursuit of money should not form the cornerstone of one’s existence. Spending time with family, pursuing one’s hobbies and also giving back to society are as important as any of the other principles of financial freedom. It is no use pursuing wealth so that your family can live in comfort if your family disintegrates in the process due to lack of love, bonding and quality time in the home. If for example going on holiday is what makes you happy, then it is important to spend your money this way instead of denying yourself every cent yet feeling miserable at the same time. The important thing is to achieve a balance so that what you do today to make you happy does not leave you and your family miserable and broke a few years down the line.
I claim no expertise in the area of building blocks for a financially secure future as I have only also began practising these same financial principles myself. I continue to learn each day on other ways that i can better improve my financial foundation and i have found that by practicising the basic principles stated above, my life has improved dramatically leaving me happier than i have ever been, more in control of my money and financially secure enough to pursue the things that are most dear to me. Please bear in mind that the above list is not exhaustive but is a useful guideline for someone wishing to embark on a journey towards financial abundance.
My Road To Wealth 