The Right Mindset for Financial Independence

Over a decade ago, I got my first ever formal job and to my mind I thought this meant financial independence, or at least a first step towards what felt like it. However a few years into my career, with the onset of the 2007-2008 credit crunch, it slowly but surely dawned on me and millions of people like me, that I wasn’t as financially independent as I thought and that was when I decided to get serious about money.

When people talk about money, it evokes various emotions in them and personally, I want to live in a time when money doesn’t immediately mean stress. This is essentially what financial literacy does for you. It puts you in charge of your money and shows you tried and tested ways to better manage your income.

When you’re better informed, your income can begin to work for you either in retirement or even in times when you are out of a job or facing life challenges like sickness.

There’s a well-known rule that offers a guide on how best to plan for rainy days or emergencies. It simply states that you should have the equivalent of three to six months’ worth of expenses in your emergency savings account. At InvestNaija, we actually advise at least three months’ worth of your income, to best prepare you for any major unexpected expense or trying times like when the world economy witnessed a slowdown during the 2020 Coronavirus pandemic.

When I got serious about personal finance, I was admittedly quite anxious. This anxiety is what financial analysts’ measure as risk appetite, basically your financial objectives and the decisions you need to take to meet them (Hold that thought!  We will get to know more about this in another article). So, my anxiety was really around why and how much to put away for tomorrow when I am not certain of being here tomorrow.

The reality is, even if this is a valid fear for many of us, we still need to live our best lives whether now or later and so do our loved ones who will come after us. My honest advice is start now, start small. This is exactly what I did.

For one, our income is able to do much less than it could several years ago, most especially because of the ever-rising cost of living (inflation). For example, at the start of the year, a loaf of bread costs N250 on average, now that same loaf costs at least N800.

So I started small and safe, I got frank about figuring out where my money goes at the end of every month and then budgeted using the 50:30:20 rule, a concept I will share more on later in this journey. Simply put, I started saving up at least 20% of my income every month, into a savings account.

Next, I wanted to earn better rates than what my bank was offering at the time, for the little money I had to start with. Through my learnings, I discovered there was a wide range of investment options that offered better rates than a standard bank account like mutual funds, treasury bills, stocks, exchange traded funds (ETFs), bonds and alternative investments (real estate, infrastructure, etc.). I started with mutual funds and have since diversified and grown my savings and investments portfolio significantly over the years.

At InvestNaija, we want to take you on a journey to financial independence, one we have personally travelled. We will share with you all we have learned along the way but most importantly, we will talk about finance in a way that you will understand.    

If we can do it, you can do it too. Get INvolved. Are you IN?