Making your way to Financial Freedom – Mommy’s Easy step for “Mga Nanay ng Masa”

Imagining yourself debt free, with a nice house, and worry-free on where to get money for hospitalization, and emergency when there’s little or none at all left with your 15-30 salary?

Everyone of us, I know, would always dream that one day, we will just be sitting at home or we are somewhere taking our vacation and yet our source of fund if not running out.

That’s, FINANCIAL FREEDOM!

Financial Freedom or Financial Independence is generally used to describe the state of having sufficient personal wealth to live without having to work actively for basic necessities (Cummuta, John, "The Myths & Realities of Achieving Financial Independence. Nightingale Conant. Retrieved on 14-Sep-2009)

But the way to financial freedom is NOT EASY. We’ve got to make sacrifice TODAY, to attain financial freedom TOMORROW. As an ordinary person, I believe that the following are basic ways and sacrifices towards financial freedom:

Free yourself of debts

 Having borrowed some money subjects yourself to interests which still cover a part of your budget. The interest that you are paying could have been your savings. Also, avoid using your credit cards if you can’t pay everything on time. They will charge you with service fee and that accumulates every month. If possible never have one because to some, it will only serve as temptations, but if it is really necessary to have one, choose credit cards that do not charge Membership Fee.  

Live a simple low budget life

 I don’t mean here you have to live poorly. I mean here, you have to live below your means. Earn P100 and yet spend lesser. How much, it really depends on you. Us, we only spend 70-75%. And that already covers our emergency fund. Limit eating out if you can still cook at home. What’s the difference between a Jollibee Chicken Joy and your own home-made friend chicken? (if there are 3 of your that you cost at around P300.00 at Jollibee, at home around P150.00 you can already have a bucket plus you have a P150.00 savings)

Avoid Buying Unnecessary Things

As much as possible, avoid buying new things when the old one is still functional. Buying a new TV? Why, is it urgent? Is it important? After hubby and I got married, the first TV that we had was the old TV of my parents. It was still functional at that time. We only bought a new one after some series of failed attempts to make “oldie” work.

Buying new stuff while the old one is still functional only increases your expenses and yet not adding to your income. Where does that leave you?

Make a budget allocation

Making a budget list will help you in determining your priorities. And following your budget list will surely help you towards financial freedom. I too have a monthly budget list, with budget priorities. I will make another blog on how to make a budget list later.

What you save, you must invest

For me, it’s not only that we have saved, but it’s that we have INVESTED. What’s the difference between saving and investing?  In my own understanding, saving is just merely putting aside a part of your money or product for future use. Investing on the other hand, is making your money expand. This is coupled with risks though.

In saving,  the P5.00 that you save today is still P5.00 12 months after. But in investing, your P5.00 might become P7.00, P10.00, P15.00 or more. There are a lot of ways on how to invest. And thankfully, these gateways towards financial freedom are all made available to common individuals. We can be investors. (Separate blog about this)

Create Passive Income

Whilst, investing is for the future, passive income for me is for the present. With passive income, we can have more capability to manage our finances. What’s more, with passive income we can also increase our investments.

If you can already live within or below your income, use your passive income to generate more passive income or use it for investments. With this, the way to financial freedom is faster and bigger.

SUMMARY

To sum it up, it all comes down to our present lifestyle. We are what we are and we will be what we want to be. If we want to be well off in the future, that we still have time today to prepare for it. Some choose have a lavish lifestyle today, it’s their choice. 

Now, I can understand what my dad is always telling me. It was because that we lived a simple life that we were able to graduate college and he was able to get all his retirement benefits in full when he retired because he did not have liabilities in Pag-ibig and SSS. He was not used to borrowing money, and we were used to a lifestyle that does not demand a weekly Jollibee or new clothes and shoes. I guess, the only thing that he failed to do was invest a little amount of his salary, if he did, he might have retired a millionaire. Now, with time in my hand, I’m planning to do just that.