Financial independence (also called financial freedom) is the ability to live on the income from your personal resources (assets). The value of personal assets that would facilitate financial independence varies from person to person depending on the lifestyle each individual chooses. If you want to live modestly, you really don’t have to build a huge asset base before you can become financially free. However, if you choose a rather lavish lifestyle, you will need an extensive asset base in your quest for financial independence.
When you are financially independent, your decision to work is not borne out of compulsion (you can afford not to) but a product of the love for what you do. I believe financial independence should be the goal of every right thinking individual because the benefits are immense. When meeting your basic needs ceases to be a cause for concern, you are free to do more rewarding things with your life. You can focus on family, relationships, personal and spiritual growth, etc. The imperativeness of meeting basic needs before the mind can contemplate more important issues underscores Abraham Maslow’s popularized ‘hierarchy of needs’.
One of the earnest desires of every human being is freedom – freedom to do whatever s/he chooses to do. Unfortunately, most people are not free and the reasons are not far-fetched. Nothing confers freedom on an individual better than financial independence. Someone said: “It’s an incredible feeling when you walk down the road and you know that no one has a claim on you or your assets.” When I heard that, I decided that’s the feeling I want to have all the days of my life. I believe the real import of your mind being free from the daily essentials of life is that you will be able to unleash the latent creative power within you to accomplish more rewarding things. Following on the heels of your creative power being unleashed is the increased risk-taking ability that financial freedom enables. It’s when your basic needs have been met that you can think about savings and, ultimately, taking investment risks.
The fascinating thing is that anybody who dares can become financially independent. This is because we can all do something about whatever situation we find ourselves. I always use one of the topics in elementary economics as an illustration for my postulation that anybody who is desirous and willing to work can be free from financial worries. In basic economics, we are thought that factors of production are: land, labour, capital and entrepreneurial skills. This means that production is the proven route to success, freedom and happiness. If you don’t produce, you won’t be happy.
Taking the factors of production concept further, land owners are entitled to rent, labourers to wages, capital owners and entrepreneur to profits. Let’s take a hypothetical case of Mr. Joe who is starting out without owning land and capital or being an entrepreneur. He definitely appears disadvantaged at the outset. However, if he is really serious about becoming financially free, he must find his level in the productivity chain. One of the things he can do is to seek employment as a labourer. For his labour, he gets paid wages. Out of his wages, he must set aside a specific amount (not less than 10%) to be saved for investment purposes. Amounts set aside should be kept in an interest yielding account. Once the funds in his interest yielding savings account reach a pre-determined amount, he should then invest in a venture that meets his risk profile. This process must be continued until it makes sense to do something else.
By taking the steps enumerated above, Mr. Joe who started a labourer soon becomes a capital owner and starts earning profit. Before long, he acquires land with the potential to earn rents. If he is interested, he may also go into other business ventures that qualify him an entrepreneur. The reason he must transit from a wage earner to a profit earner is because it is the sure way to financial freedom. In the words of Jim Rohn, “profits are better than wages, wages make you a living while profits make you a fortune”
While executing his savings and investment decisions, Mr. Joe must not lose sight of the need to build quality human relationships. In point of fact, he must make that one of his goals. This is because financial capital is only one amongst other forms of capital. More often than not, the quality of a man’s relationships has a far greater impact on his well-being than all other forms of capital.
It’s noteworthy to mention that morality has little or nothing to do with being financially independent or not. I know some nice people that are struggling financially and I also know shrewd business people that are independent financially. What is indeed critical for your financial independence is your awareness and having a plan of action to exit financial bondage. When it comes to financial independence, ignorance is not bliss. You need to be financially literate. I am not talking about becoming a financial accountant. No! Just have enough knowledge to be able to make investment decisions. To this end, read books on financial freedom. Get a financial mentor. Go look for a financial planner. Get educated on financial matters because it’s very important for a good life. Zig Ziglar said that in the hierarchy of human needs, money ranks high with oxygen. In effect, without financial wherewithal, you can get asphyxiated.
As I end this article, let me share a true-life experience that I posted on my Facebook page (www.facebook.com/waleadeniranye) recently. I titled it ‘A Day I Will Not Forget’. The story clarifies the fact that the amount a man earns is not as important for his financial freedom as his plan to become financially free. The concluding remark regarding the story you’re about to read is that a low-salaried person can become financially independent with the right plan. I hope you enjoy it.
With the spate of down-sizing and right-sizing going on in the banking industry, I am led to share an experience I had some years ago. Please share this with others especially if you know someone that has just been laid off.
In 2005, I was an assistant general manager in one of the Nigerian banks. As a consequence of the ‘forced marriages’ which the Central Bank of Nigeria instituted, my bank laid off some staff. One of the affected staff – Mr. Q (this has no bearing with his real name), came to see me in my ‘big’ office. When I saw him at the door, I thought: “What do I say to this guy now? How much can I give someone whose means of livelihood has just been severed?” As he made his way in, I started rehearsing the verse of the Scripture to share with him so as to give him hope. When he eventually sat down, I found the expression on his face a bit confusing – he had no trace of someone who had been laid off. When I saw that I felt a bit relieved.
I asked him: “What can I do for you.” He said, “Oga, I just came to thank you.” “Thank me?” I retorted. “Yes, to say a big thank you to you.” In my mind, I thought: “Interesting, what did I do? Tell me your story.” As if he knew what was on my mind, he opened up. “Oga, you see eh, I’ve been on this job for 15 years. For one day, I was not arrested talk less of being detained in the Police Station. I hear about the Economic and Financial Crime Commission but I’ve never been to their office for any reason. My wife is alive and well.” I can’t remember if he mentioned his children. He continued: “All these years I was never involved in any accidents. I am hale and hearty. Now the bank is saying I can go home. Not because I committed a crime. On top of it, they are paying me some money. Oga, do you get my point?” I thought: “Before nko? Why won’t I get your point?”
Then I asked him: “So, what are you going to do?” At this point, the conversation got very interesting: “Oga, you see, I have a small medicine store which I opened for my wife a few years back. She has an attendant in the store and when she returns from her regular job she stays in the store till late in the evening. The store is doing well” The wife is a trained medical staff in one of the health institutions in Lagos. Continuing, he said: “Me, I have a small business I am managing.” I didn’t know when I said: “So you’re okay the way things are?” He replied, “Oga, I am okay o! Just help me thank God.” I was pleasantly surprised. I then gladly congratulated him and thanked him for choosing me as someone to share his testimony with. He told me I’ve been good to him. I had no idea what I did for him and I didn’t bother asking him. I said a few things to him. You can only imagine what I said because I was highly inspired by his testimony.
To say the least, I was dumbfounded. Ten minutes after he left my office, I couldn’t do anything. All I could was to marvel. This man worked for 15 years and at the time he was laid off he was still below the level of a banking officer (I started my career as a banking officer in 1993). He never had the opportunity of owning an official vehicle (I was using my second official car). I thought of Senior Managers that I heard were crying when they were laid off. Mr. Q’s testimony made a serious impact on me. I had no choice but to intensify the reordering of my priorities. I promised myself that I would never leave banking embittered.
Just recently, I came across what Plato said several years ago: “The greatest wealth is being content with little.” It dawned on me that Mr. Q is indeed a wealthy man.
“…A man’s life does not consist in the abundance of his possessions.” Luke 12:15