Chapter 1, The First F; Financial independence, part 1

A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life. — Suze Orman Are

A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life. — Suze Orman

Are you financially independent? Do you have enough money to cover your basic needs and have some to save for the old age?

You need money to buy your needs and wants. You cannot be happy and achieve peak performance unless you afford to buy your basic needs. How do you ensure you are financially stable to have peace of mind?

Considering that man’s needs are a moving target, you need a plan for financial independence to be able to focus on the bigger things.

Why would you live in a US $1,000 monthly rented apartment, when your monthly salary is just $2,000? You must adjust your lifestyles to ensure you live within your salary. You must error on saving and investing.

Write this down:

Your total fixed monthly costs on needs (rent (shelter), fees, utilities, food and travel (from home to your place of work)) should not exceed 40% of your guaranteed monthly income.

Always set aside at least 5% of your salary for emergencies and save 25% of your monthly net salary (in stocks, land, personal improvement, and small business).

If you don’t have health insurance, set aside another 5% for your medical bills.

You can then try to spend on wants (special eats, clothes, parties, entertainment, social, etc) the remaining 25%.

“Success is your ability to be well-off tomorrow than you are today.”

If you don’t save and invest wisely, you are unlikely to make your tomorrow better.

In summary, if your monthly net income (income after all taxes and other deductions) says; US $1,500, consider spending it as follows:

Table 2: how to spend your income.

Keep in mind that your net monthly income is not the issue here. It is the percentage distribution of your net income that makes all the difference.

A spending strategy like that in the illustration above will help you avoid the poverty point.

To be continued…

In the next article, understand the poverty graph and why you must plan for the retirement point while still young.

To read the complete book, click here >>

Copyright Mustapha B. Mugisa, 2020. All rights reserved.

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