Publication 9. 2018

Wealth can only be accumulated by the earnings of industry and the savings of frugality.

John Tyler

There is no one that I know who would NOT want to be financially free; to have the option to work because they want to and not because they have to. Almost everyone wants to be financially independent so that they can have the option to choose what they wish to do. In other words, to take a vacation where they wish, to support a cause they are passionate about, to volunteer instead of work if they want to or to invest in a project that they believe will add value beyond monetary returns. To get to this level of freedom is not necessarily far removed from you. Anyone can get there. I will tell you how.

Outside of a great inheritance, the one foolproof way of gaining financial freedom is through investing. It has been proven that you cannot get financial freedom from just your salary. It is not heard of unless you are the CEO and are enjoying some great bonus packages. Because most of us are not the CEO, we should look to the next best option – investing. Growing wealth so that you can be financially free is not impossible, neither is it hard. It is quite easy, the only thing you need is the right amount of discipline and some simple tasks. The following are basic tips that I believe can take you a few steps closer to your financial freedom.

1. Don’t spend more than you earn.

It is very simple yet people tend not to do it. The biggest mistake people make each month is to spend more than they have as disposable income. They do this by taking out loans that stifle their means of taking care of themselves or rack up large credit card debts that they are not able to pay in full at the month end. While we may have to take out loans to buy a house or a car or to fund our studies, the monthly payments on these loans should still be within your ability to pay back each month. In other words, when all is due to be paid including your bills, it should be less than the amount you take home for pay. To help you with this, you can prepare a budget. It doesn’t have to be a formal one. It can be a simple document that lists all that you have to spend during the month against the amount of money that you have available. Once you have this on paper, it becomes easier for you to take control of the items you spend on and you will also become more aware of your spending limits.

“Find $50 a month for savings. No excuses!”

Suze Orman

2. Save a set amount all the time, every time.

No matter what may happen during the month, regardless of the circumstances, you may face, always, always, always, always set aside a set amount of money each month and place it into your investment account. The only exception to this is if you are unemployed. Let it be an automatic withdrawal from your bank account or your salary. Perhaps you can set it up as a standing order or as a periodic payment on your online account. If possible, you could arrange with your employer for it to be deducted from your salary before it even gets into your account. If the withdrawal is done automatically, then the monies are being withdrawn without your intervention or the possibility that you may forget to make the payment for a particular month. Over time, this monthly inflow will grow into something worthwhile to support a financially independent lifestyle.

3. Do not get overly excited and withdraw the money without cause!

After a while, your investments will start to show some favorable returns! This is the power of compound earnings on your investment. Over time, your monthly inflows along with the earnings you are making on the increasing balance shall result in an exponential increase in the balance of your investment account. When you see this growth, do not take it out to celebrate but let it continue to work for you. Do not disrupt the power of compounding, not unless it is absolutely necessary.

The goal of these tips is to ensure that you invest consistently so that you build a large portfolio. Once big enough, the earnings can then be used to cover your monthly expenses and you would not need to withdraw from the actual money that you had originally put in. That my friend would be the start of your financial freedom!

This editorial is presented to you by the DCSX with the collaboration of Vertex Investments.

Author of this publication: Stephanie Shaw CFA, MBA.

Download the PDF version of this article: NL PAP EN