Piggy bank

How to save and invest, a future proof solution to financial freedom

Different people define financial freedom in various ways. Some people interpret it as the freedom to buy what they want and when they want. For others, it may mean not worrying about how they will pay their bills or sudden expenses. For some, it could be just becoming debt-free, while for others, it could mean being rich enough to retire even before the set time.

Financial freedom doesn’t come by just daydreaming but with effort. This effort is put into saving and investment.

What is saving and investments?

People save by putting money in a savings account or credit union to cater for their needs when it arises. This is a conscious act of putting money aside to use later. Usually, we save to pay for things like a house, car, vacation, or cover for an unforeseen event.

On the other hand, investment is putting your money in aspects where the money is used to work and grows interest for you.

Who can save and invest?

Saving and investment are not limited to one particular group of people. Anyone can take this individual decision once they have a job that earns them money.

Why do people save?

People turn to saving and investing for many reasons, and these are a few reasons why;

  1. To minimise financial risk and stress.
  2. To cover for sudden emergencies.
  3. To get the financial freedom one desires.
  4. To create financial independence.
  5. To leave a financial legacy behind.
  6. Others, for example, marriage, holidays, education.

 

How do you save?

Though it sounds like an easy thing, saving is not, and it’s a tough decision that requires a lot of discipline. Therefore follow these few steps to save towards your financial independence;

  1. Understand where you are currently; you need to know yourself and the kind of job you do, how much you earn and how much you want to be financially dependent. You need to have a fair idea of your financial state, with accurate knowledge of your income, expenses, assets and liabilities, as they will influence your decision on how much to save.
  2. Eliminate debt; do not just wake up one day and start saving. Make sure you are debt-free. As much as you can, do well to pay off all your debts before you decide to save to prevent going back and withdrawing from your savings account.
  3. Keep track of your spending; do well to know what and how you spend your money. You can write down things you spend on and look through them at the end of the month and make changes if needed.
  4. Separate your wants from needs; you need to set priorities when you truly want to commit yourself to saving. Prioritise your daily expenses, make sure your money is spent only when it is necessary, and do not spend because others are.
  5. Slash living expenses; try as much as possible to cut down on your living expenses. This could range from housing, food and clothing. Avoid impulse buying.
  6. Find a side hustle; besides cutting down living expenses, one can also find a side job or two in other fields of interest. For example, a nurse can take up the job of writing articles to earn some money which she can save for future use.

How to invest

Everyone is unique in their financial situation; therefore, the best way to invest depends on your personal preference and your current financial status. You may consider a few of these pathways to invest towards your financial freedom.

  1. Give your money a goal; figure out how to invest your money by determining your goal, what you want to achieve, and bearing in mind your comfort level and the risk involved. You may decide on a long investment plan or a short term.
  2. Pick an investment account; decide on the type of account you want to use. Choose wisely. Some accounts offer tax advantages if you are investing for a specific purpose like retirement. Consider the risk involved and make an informed decision.
  3. Open your account; after you have made the preferred account choice, you can now go ahead and open an account with your trusted bank to enact payment.
  4. Choose your investment option; several investment options can fetch you good money, including bonds, stocks, mutual funds, treasury bills, shares, and real estate. Consider your place of interest and make a good choice
  5. Have patience; having patience is a key way to successful investment. Investments do take some time before one can cash out. Unlike most savings, where you can withdraw at any time, investments are different. Not having patience may lead to you experiencing some losses. For example, taking early from a retirement account may attract tax or penalisation when the reason for withdrawal does not match the plan rules.

Conclusion

To achieve what one per cent of the world population has, you must be willing to do what one per cent of the population dares to do. Building financial freedom is not an overnight act or daydreaming. One has to put in the effort, dedication, and discipline to save and invest. Therefore, it is necessary to be a strong conviction before you embark on a financial freedom journey. Be consistent with your savings, be disciplined, invest and forget about. Just leave the money to grow.

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