Financial Freedom

Defining True Financial Freedom

True financial freedom is an aspiration that transcends the mere accumulation of wealth. It represents a state of financial self-sufficiency, where your financial assets and strategies sustain your desired lifestyle without the burden of financial worry. It’s less a number in your bank account or the value of your net worth – but an attitude and way of life in how you define wealth and what it means to you. The steps to financial freedom are not difficult or complicated. All they require is commitment and discipline. The feeling that accompanies true financial freedom is akin to a calmness and serenity, where financial constraints and uncertainty do not loom. It’s about waking up each morning where the thought of bills, unexpected expenses or market downturns don’t cast a shadow on your peace of mind. Visually, true financial freedom looks like a life being lived on your terms. It’s about having the ability to make choices that enrich your life, whether that’s pursuing a passion, contributing to causes that resonate with your values, or providing a cushion of financial security for loved ones. In essence, true financial freedom is about living a life of intention rather than compromise where you harness your financial resources for a broader purpose. It’s not merely an end goal but a journey of wise financial stewardship, continuous learning, and a commitment to a financially enlightened lifestyle. Through the lens of true financial freedom, money becomes not just a means of living but a tool for creating a meaningful and impactful life.

true financial freedom; having financial freedom
Defining True Financial Freedom

Steps to Financial Freedom

1. Master Your Cashflow:

Budgeting is a term many people fear and hate. But all you need to do is reframe that from something negative to a more powerful image. Cashflow management is the lifeblood of all successful endeavours, whether you’re a multinational corporation or managing your household’s finances. By understanding your finances, you can make more empowered financial decisions that will steer you towards financial freedom. A well-structured cashflow plan enables you to track your income, expenses, and savings. The goal being to increase your free cashflow, so you can invest more. The more you can invest, the faster you’re able to achieve financial freedom. Find a method that works for you, whether it’s using tools like 22seven or itemising your spending on a spreadsheet. Your goal should be to invest 20% and more of your income each month. Do that and you’re on the fastlane to achieving financial security. If that’s not possible yet, slowly build towards that. And if you don’t have an emergency fund, make that a priority. Life happens and you don’t want to be caught off-guard.

2. Get Debt Out of Your Life—For Good:

Debt is a killer – not only due the direct financial consequences, (which can lead to financial ruin) – but the underlying stress and financial anxiety it causes, even if you manage your debt responsibly. Knowing that each month a large portion of your income is earmarked to pay off your debts is stressful – whether that be home loans, car repayments, credit cards, or other forms of unsecured lending. Even with the best job or business in the world – you’re potentially a retrenchment or economic downturn away from a house of cards tumbling down. The best feeling in the world is being debt free – owing no one anything! Living within your means is one of the most important attributes to develop if you’re serious about achieving financial freedom. And what you’re no longer spending on debt repayments, can now be earmarked for investing. A win-win!

3. Set Financial Goals:

Set clear goals around what’s important to you and you want to achieve. From being debt free to saving a deposit for a house, travel or lifestyle goals, how to being financially free, your ideal retirement plan – having clear, measurable financial goals will keep you on course. Write down your goals, making them specific, measurable, achievable, relevant, and time-bound (SMART). If you’re in your 20s or 30s – understand that the idea of a ‘normal retirement’ will probably no longer exist. Because by the time you get to 60 or 65, we’ll all probably be living well into our 100’s, so being able to keep earning an income well into your 70’s (and even your 80s) is going to be necessary. That’s why finding something you enjoy doing now is so important (even if you start it as a side hustle).

4. The Most Important Step to Financial Freedom –  Invest in Yourself and Your Future:

The most important investment you’ll ever make is the investment you make in yourself. The knowledge, skills and experience you acquire to fulfil your innate potential is the single most important step to financial freedom. Take care of that and everything else will fall into place. There are so many ways to generate income today, beyond just formal employment. AI will disrupt and change that even more. From formal education, to seminars, books, courses, online learning – you should always be curious and want to grow. Equity (not income) is the fastest way to freedom. That requires the courage and vision to take the entrepreneurial route. But it’s tough and not for everyone. More importantly, find something you’re good at doing. Money will follow.

5. Master the Basics of Financial Literacy:

Financial literacy today is so important. There are so many scams and Get Rich Quick Schemes going around. And it’s easy to get duped or take advice from people who only want your money and don’t have your best interests at heart. Learning the basics of financial literacy is not difficult. And just because someone sounds like they’re saying something clever on TikTok or YouTube, doesn’t mean they’re credible or you should trust what they’re telling you. There is no magic formula or shortcut. Be smart. Do research. Have people you trust you can talk to about stuff. And always be learning.

7. Invest Intelligently for Your (Retirement) Future:

Retirement is starting to feel like an outdated word. Because how we think about retirement is going to have to change due to the advances in longevity that will be inevitable as science and technology come together to change the face of healthcare. That doesn’t mean you shouldn’t have a plan to achieve financial freedom. Investing more for longer is ultimately what its going to boil down to. So, finding work and ways to generate income well into your 70’s and beyond will be important. Being able to generate passive income streams from multiple sources is the surest way to safeguard your future. And a diversified investment portfolio designed to compound over decades comprising investing in equities, property, alternative assets (and ideally equity from your own business) – will ensure your success, no matter what happens.

Read Next: 15 Timeless Pieces of Investment Advice that will ensure you achieve Long-Term Investment Success.

8. Look for Ways to Save Money and Pay Off Your Bond Early:

One of the most important steps to financial freedom is getting out of debt as quickly as you can. And home ownership is usually the biggest component of that. On a home loan of R3 million at current interest rates, your monthly repayment is about R32,500 – and at the end of 20 years you have paid a total of R4.8 million (R1.8 million or 60% of the value of the loan as interest). But by paying an additional R5,000 per month into your mortgage every month – your home is now paid off in 13 years and you save about R1.9 million in interest. So, the smart thing to do when buying property – is from the outset have a plan to pay in more than you need to and get your bond paid off early. That R32K per month in bond payments can then be redirected to your financial freedom investment fund. And then be smart with how you shop and spend money. If we all look at our spending habits, there are so many ways we can be smarter about what we spend money on (and where) – which can save a ton over time and be used for better things.

9. Make Your Health a Priority:

Even if you’re financially free and don’t have the health and peace of mind to enjoy it, what’s the point? But more importantly – a healthy lifestyle can significantly reduce medical expenses. In South Africa in particular, where we carry the burden of expensive medical aid cover to provide us access to healthcare (with a lot of out-of-pocket expenditure), the less we need to spend on medical related costs, the more we have for investing, fun, and living a life of quality. Embrace regular exercise, balanced diets, and preventive healthcare to foster both physical and financial well-being.

10. Get the Right Risk Cover in Place:

All your savings could vanish in an instant without the proper protection against life’s unforeseen events. Insurance is your financial harbour, offering protection against life’s unexpected storms. Engage with pros to ensure you have adequate coverage for life, health, home, and other valuable assets.

11. Hire a Financial Planner:

There is a lot to manage, plan and figure out. If you have the time and inclination to want to do it yourself, go for it. But having a trusted partner, guide and coach to help create a framework and plan for achieving financial freedom – and hold you accountable for achieving it, is worth paying for. Naturally, that’s what we do at Henceforward, so get in touch if it’s something you’d like to discuss. The value of working with a fee-only firm also ensures you someone always acting in your best interests.

10 steps to financial freedom
10 top steps to financial freedom

What Having Financial Freedom Means

Having financial freedom is a mix of having sufficient resources (assets) to life the lifestyle you aspire to living, without worry or stress. It doesn’t mean needing to be a gazillionaire with all the flash and bling, but instead its about living your life, on your terms. And having financial freedom isn’t just about money or wealth in the traditional sense. Your mental and physical health, relationships, and having a sense of gratitude all contribute to the feeling of freedom. There are a lot of rich people in the world, who are not free – but consumed by fear, greed and live a lonely existence. Financial freedom is a voyage of diligence, discipline, and strategic planning. As you navigate through turbulent times – arm yourself with the right financial knowledge, tools, and professional guidance. Your destination of financial stability and freedom is a horizon worth sailing towards.

Carl-Peter Lehmann

Carl-Peter Lehmann

Carl-Peter is a Director and Partner at Henceforward. He is a CERTIFIED FINANCIAL PLANNER and INVESTMENT PROFESSIONAL with over 20 years experience. Helping people think about financial freedom and how to achieve that, is something he is extremely passionate about.

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