Tomie Balogun: Five Tips For Millennials to Gain Financial Independence

‘’I want to be a billionaire, billionaire…eh…eh’’

I am not sure if it is the lure of designer items and luxury living that makes us all sing and dance to this song by Nigerian artiste, Teni, or the nice rhythm that lures us all into moving on the dance floor.

If you ask most people, it is the former. We all crave comfort and living life on our own terms. This is definitely not a bad thing to aspire as life, in itself, is meant to be explored and enjoyed in every way.

However, we must caution ourselves, lest we let the aspiration for financial independence lead us into activities that end up making us worse or landing us in disgrace.

There are multiple levels of financial independence. The first level is financial security. You have financial security when you can afford the basic necessities of life such as food, shelter, transport, etc. Or when you are living on the income from your passive streams of income.

Often times, in focusing on financial independence, it is easy to get overwhelmed with the number of zeros required to achieve true independence. I got overwhelmed as well when I realized how much it would take to achieve financial independence. Once we found a way to break it down into small, mid-term and long- term goals, it became more achievable for my family and me.

Here a few tips that can set you well on your way to achieving the first level of financial independence: Financial security.

Get Your Thinking Straight

As a man thinketh, so is he.

Your mindset will determine what you achieve because all things are formed from thoughts. Man is a thinking being and can originate thoughts. If you think you can achieve financial independence, then you can. It might sound simplistic, but the hard work is in believing this core principle even in the face of lack or economic issues. The right thinking about money and financial independence will change your life for good. So, study books about mindset, attend the right conferences to learn from those who have achieved what you want to achieve and see yourself move in the direction of your dreams.

Achieving financial security does not depend on your environment. A lot of people believe their ability to achieve financial independence depends on their environment. If this were the case, we will not have the richest man in Africa from a country like Nigeria. You cannot save your way into riches. Frugality is not the means to financial independence. If it was, you will have to be frugal all your life to achieve financial independence in retirement.

Get your Financial Habits in Order

We do not rise to the level of our goals, we fall to the level of our systems.

Habits make up our day to day lives and eventually add up to where we find ourselves in the future. Today, we are all experiencing the results of the daily money decisions we made a decade ago.

It is important to start by getting bad financial habits in order. If you don’t get the bad habits like overspending, building up debt to buy things you don’t need in order, you’ll keep going in cycles of dependence even when you earn more income.

It is not your income that will determine financial security or financial independence, it is your money habits and decisions that determine eventual financial independence. This is also related to how you think. If you think you cannot overcome your bad spending habits, then you can’t. Whether you think you can or you can’t, you’re right.

Put Your Money to Work

In simple terms, investing means putting your money to work. If we don’t want to keep working for the rest of our lives, we need to make sure our money works as hard as we work.

Once you get your financial habits in order, you’ll find that you have the extra income you can save or set aside. It might not seem like a lot of money, but it eventually adds up.

One of the amazing things about compound interest is how it builds up your savings over time, even if you start small. You’re better off starting small with what you have than waiting to invest when you have a lot of money. Make the best use of time and compound interest by starting small and building up your investment portfolio over time.

Build an Emergency or Safety Fund

Don’t just save or invest randomly, work towards building emergency/safety funds.

We should have at least 3- 6 month’s (you can do 12 months or 2 years) worth of emergency funds saved up and invested in a safe investment option. An easy way to do this is to do a rough calculation of how much you need to maintain your standard of living in a month. Think about how much you spend on food, transportation, rent, etc., estimate an amount of money for a month and save that in multiples of 3-6 months in a safety fund.

For instance, if it costs N50,000 to survive monthly, you need at least N150,000 for 3 months or N300,000 for 6 months in a safety fund. You can invest these funds in a money market mutual fund to keep it safe and also restrict your access to it.

Get into an Accountability Group

No man is an island and we all need all the help we can get. One of the reasons I started an investment club was because I recognized I needed to hold myself accountable for my habits and my financial goals.

If you find it difficult to build new money habits, then you need the right people around you to help you get better. Get your friends to help you think on a new level of frequency where you’re thinking about financial independence in a different way. Have money meetings with your friends; talk about money, investment opportunities and your financial plans. It will expand your thinking and make you see what you need to do to be financially disciplined.

You can achieve financial independence, but you need to start somewhere. Start with getting your finances in order to achieve financial security and you’ll be on your way to financial independence over time.