I have always asked myself if owning a business makes a person financially free or makes people wealthy. If the answer is yes, then that means we all have to be business owners owning multibillion dollar conglomerate but if we all own multibillion dollar conglomerates, who will work as staffs to grow the company to a greater height? If this is wrong, then let’s look at something else.
If working all the days of a person live from Monday to Saturday till the day you retire makes people financially free, then people aren’t supposed to have problem financially when they retire but most of the people I see who worked tirelessly from Monday to Saturday till they retire till end up struggling with finance.
To explain this better, I will give an example which I believe will be self-explanatory. I have a friend who works as an IT consultant for an IT firm and gets a good pay. He has been working in the firm for about 10 years but doesn’t have 10% of his salary saved and does not have any investment to his name, I could have said maybe he is rich on paper but he isn’t. One day while we were having a little chat about getting married and he told me he had a problem with his finance and that he can’t tell how he spends his salary. Then I asked him to tell me how he spends his money, which he did; 70% for basic necessities which include food, clothing and shelter, 10% transportation to the office, 10% for (Fun, eating out and going for lunch), 10% for miscellaneous and when people ask me for money.
That was the most ridiculous spending percentage I ever heard, I was dumbfounded and started to ask myself “can my friend have a happy retiring”? He did not have anything for days when he had an emergency, he didn’t have any savings and he didn’t have any investment. I will be talking about a solution later.
Unlike employees, most employers tend to have ease with finance, they look more financially okay except for a few who just got lucky with money and do not understand the flow of it. Most employers tend to know how to keep money around them because they had to save, get investors, build a name, build a brand, and keep their companies going and all this falls back to keeping money around. You can’t hold a company for long if you do not understand financial management.
Anyone can be financially stable either as an employer or as an employee, the major focus to attain financial success is understanding personal finance. As an employee, saving 30% of your paycheck isn’t a bad idea for a start, and also having 10% for emergency in a different savings account is another good move because people with emergency account often have cover during difficult times compared to people without emergency account. As a person, you are left to do what you please with your remaining 60%.
The aim is not to save up money but to have money coming in all the time even after retiring so what you can do is invest your 30% saving as money in the bank do not often yield proper interest. You can invest in real estate, bonds or stocks, REITs, physical commodities and precious stones and so on. Every time, you add 30% of your income as well as returns from your investments back into the investments or diversify into other investments. Doing this for a very long time, will keep you financially free in 20 years as your interest will be increasing, and you income keep coming while you plan to retire.
This post is original and in my words. You can read more about growing your personal finance here
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