Finance

Road to financial freedom

Remy Osuagwu

Everyone desires to be financially free. This is because as humans, we naturally desire a better standard of living. Achieving a better living standard, however, most times is not achieved on a platter of gold. It is not a sprint but rather, a marathon.

Every journey begins with a single step. The steps we choose to take in life, including the financial decisions we will make, go a long way in shaping the level of success we will attain. These decisions can either make or mar one’s journey to financial freedom.

Attaining financial freedom is dependent on several factors including our income, expenses, lifestyle choices, investments, and savings. Whether you are an entrepreneur, corporate employee, self-employed professional, or you have a passive source of income like an inheritance, these aspects of business and economics play an important role in your finances.

The major pathways I recommend to individuals who wish to achieve financial independence are savings and investments. By saving, one is setting aside income for emergencies or future uses. It is the preservation of funds that are not required for immediate consumption for a period of time.

Saving means consuming less in the present to have more funds in the future. The act of saving requires dedication, consistency, and discipline. Investments on the other hand are assets or items acquired with the goal of generating income or appreciation of resources. Appreciation refers to an increase in the value of an asset over time. When an individual purchases an item as an investment, the intent is not to consume the item but to use it in the future to create wealth.

Many Nigerians are however inclined towards consumption with minimal savings or investments due to several economic barriers. The lack of a savings culture negatively impacts our growth. Renowned economic analysts often base Nigeria’s present economic predicament on the absence of a savings culture. The country lacks infrastructural development because the government expenditure outweighs its savings. Policies must be put in place to encourage investments in key areas of the economy. To drive growth, more investments need to be made in infrastructure, which will yield positive outcomes in the future.

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Another factor that impacts our savings culture, is the current state of the economy. With household income declining while inflation rises, the average Nigerian finds it challenging to save. According to the National Bureau of Statistics (NBS), 40 per cent of the population, or almost 83 million people, live below the country’s poverty line of $1.90 a day. Prices of food items have greatly increased with the current inflation estimated at 13.25 percent. With such statistics, the propensity to save is low.

However, these realities are also the reason why the savings culture should be aggressively imbibed.

The importance of savings cannot be overemphasised, yet, people find it challenging to save. Saving funds is a positive habit all individuals must cultivate to achieve financial stability. Building wealth requires making good financial decisions early.

Having funds can bring about peace of mind. There is comfort in knowing that there is a stash somewhere to fall back on when there is an urgent financial need.

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A major advantage of saving is that it cushions the effect of unexpected occurrences. When emergencies occur, there is usually pressure to look for extra funds at very short notice. This problem can intensify if the emergency is a sudden illness or a job loss. A sudden loss of income can leave an individual in a precarious situation. Hence, having savings can be a great cushion of comfort whenever the need arises.

Tales abound of individuals who have lost jobs but have a financial cushion as a result of their robust savings account, which stemmed from having inculcated a savings culture. There are also examples of individuals that have gone further into penury because they had no form of savings.

Making a good investment is the key to building future wealth. Choosing where to invest and what to invest in, are crucial factors on the road to financial freedom. Buying stocks, from a firm like Stanbic IBTC, which offers zero fees to open a stock brokerage account, is a great way to invest funds. Stanbic IBTC’s pedigree and proven track record of wealth management, has helped many investors to attain stability and financial growth. Asides from stocks and securities trading, you can purchase assets that will create long-term value, depending on how much you want to invest.

To be financially free, certain steps must be taken. The first step on the journey to financial freedom is a carefully planned budget. In my experience, setting clear financial goals and mapping finances into fixed, variable and unforeseen expenses will help one to effectively sort out monetary priorities.

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Secondly, having funds available for retirement is a wise and strategic plan towards achieving financial independence. A lot of people find it hard to save money for retirement because of future uncertainties. They fear they may not live long enough to use such savings. The prevalent thinking is that we need to enjoy now because no one knows tomorrow.

Nonetheless, it is better to save, which may come in handy for an individual’s beneficiaries in the unfortunate event of death. It is also prudent to have a pension plan coupled with savings retirement funds. Making a habit of saving a small percentage of one’s income over several years can accumulate into a substantial amount of retirement assets. This will make retirement much more comfortable.

To encourage a savings culture in Nigeria, Stanbic IBTC is supporting individuals with a Reward4Savings promo. The promo entails saving small funds and getting cash rewards. A robust savings will ensure that an individual is on the path to financial stability.

Finally, to achieve financial freedom, an individual must plan and protect his or her wealth and assets. Having a sound financial plan and adequate insurance in place is the best course of action.

In the words of Warren Buffet, “Do not save what is left after spending, but spend what is left after saving.”

Osuagwu is the Head, Business and Commercial Clients, Stanbic IBTC Bank Plc

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