The journey to financial freedom: Navigating life’s “What ifs”

The Journey to financial freedom is often riddled with realities of life that could easily influence your journey to continue or decide to put a pause on your plans. Unfortunately, at times, when we put a pause on our plans we tend to then find other things to redirect that financial commitment meant to achieve our life dreams. This is human nature but when you have set goals that you want to achieve and have specific timelines you are targeting – you cannot afford to have start and stops along the way. You simply need to be able to pivot around the budget that you have for any contingencies while keeping your financial plans in place.  But, more importantly you need to have that emergency fund that you can tap into when the “what ifs” of life happen.

 

My observation is that one’s belief system and how they are socialised often play a major role in their relationship to money and in how they then plan for what could be life changing i.e. having a proper financial plan in place. Where do you even start with this? It all starts with a desire to achieve your definition of financial freedom. Maybe that could be being debt free; being able to travel as and when you want to without even thinking twice about where the funds will come from, or it could be being able to take time out and spend it with your family to create memories that will transcend time.  Whatever your definition, the journey starts within you. Once it is clear what you need to achieve, commit to the plan and ensure you leave little for deviation by ensuring it is automated. You should also have an accountability partner, in this case you need a credible financial advisor/planner/coach.

 

The next step is to assess where you are spending your money, but more importantly assess if you are making more money than you are spending thus leaving you with some disposable income (positive flows) that can be directed to your goals and objectives. This is budgeting. The one tool that can ensure one makes good financial decisions, but we rarely use this tool effectively. More than anything one can reprioritize their spending but also think about how they can possibly close the gaps and make money that can afford them the lifestyle they want to enjoy.  Split your expenses between needs and wants and ensure your focus is on needs first which implies that for a while you can reduce the wants until you have a comfortable positive flow.  If when you assess your income and it is only from one source, you need to go back to the drawing board and see how else you can increase your income streams.  The ideal number to aim for over time is 7 income streams.  If you read rich dad poor dad the one lesson, I personally got, was that instead of saying I cannot afford something, I need to ask how I can afford it? And this talks to how one can increase their earnings but also increase their income streams.

 

Having positive flows and the significance of this may inform how soon one is able to achieve their goals and dreams when that is committed to a long-term investment plan. Below is a depiction of the basic budget we discussed and the different flows (jaws).

 

  1. Positive Cash Flow – when you make more than you spend:
  2. Negative Cash Flow – When you spend more than you make:

Negative jaws ratio graph

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