There is a big difference between being financially independent and being rich. Too many people waste their chance of achieving financial freedom through paying interest on loans, debt and luxury purchases. Everyone should strive to be in a position to choose between working every day of their life or doing the things they have a passion for. Here are 3 steps to help you get on track to achieving financial freedom.
1. Get clear and defined financial goals.
I want to retire at age 60 with sufficient assets (investments and savings) that can provide me with 85% to 100% of my current annual income.
2. Develop a plan and stick to it.
Once you’ve defined your financial goal, you need to develop a plan for how you’re going to achieve it. Below are 4 guidelines that will assist you to structure your plan.
a. Pay yourself first.
Rather than paying your debt and liabilities first, determine the amount you want to save and put that away. Then follow-up on the outstanding payments you need to make.
b. Manage unproductive debt.
These are debts and loans on assets that will not produce income. If you have debt, try to pay it off as quickly as possible so you can be debt free. Having a plan for how you will pay it off can help.
c. Have an emergency fund.
This should be equal to the total of 3 months’ expenses.
d. Grow your productive assets.
Productive assets are assets that have the ability to deliver income and capital growth on a regular basis. This could be investing in a secondary property to generate rental income. A good objective is to grow your productive assets to an asset value of 20 times your yearly expenses.
Once you have your financial goal and a plan for achieving it in place, it’s important to keep it up to date. This leads us to the final step.
3. Review and Adjust Your Plan.
It’s important to review and adjust your goals continuously especially in the case of any life changing event such as marriage.
Once you have an idea of the financial goals you want to achieve, a qualified financial planner can help you to realise those goals.
If you would like to have your current financial plan reviewed, or speak to one of our planners to assist you in establishing a financial plan, you can contact any of our Verso Wealth branches nationally, here.
– by Wessel Oosthuizen
This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)