Achieving financial freedom is a goal for many people which generally means having enough savings, investments and cash on hand to afford the lifestyle you want for yourself and your family and a growing nest egg that will allow you to retire or pursue the career you want without being driven by earning a certain amount each year.
According to a financial expert, Priscah Kyalo, all these can be achieved through financial independence.
Financial independence is the level of financial freedom (status) where one is in a position to meet their living expenses without being employed or relying on others and it is achieved by having other sources of income other than gainful employment.
There are many strategies to achieve financial independence, each with their own benefits and drawbacks.
Someone who wishes to achieve financial independence can find it helpful to have a financial plan and budget, so that they have a clear view of their current income and expenses and can identify and choose appropriate strategies to move towards their financial goals.
Achieving financial independence is everyone’s dream and desire since it allows one to live a “worry-free” life and without the pressure that comes with gainful employment.
“For one to achieve financial independence, you need to have alternative sources of income (alternative to employment), mostly through investment. You need to invest in ventures which can generate sufficient and reliable cash flow to be able to sustain your life,” Kyalo said.
Additionally, she says financial independence is achieved over time and it can take different periods of time to achieve, varying from one person to another.
“It depends on when one starts to invest and the kind of investments one ventures in.
Long-term investments like bonds, stocks and annuities can take time to generate cash-flows, while other short-term investments can take a shorter time,” she added.
Financial independence is not standard from one person to another. It depends on when one starts investing in the alternative investments and the kind of investment, they venture in.
One will know they have attained financial independence when they have sufficient cash flow from different investments which can meet their living expenses without having to rely on their salary or on others.
On where one should start, Kyalo advised, by setting aside some money (saving) with an objective to invest.
“Start small and continue building on that. Set short-term and long-term goals of where you want to be financially (in investment).
Evaluate your goals frequently to see where you are, what you need to adjust to ensure you remain focused on your long-term goals. If you successfully attain your long-term investment goals, you will be more or less financially independent, if the goals were well aligned with financial independence,” she said.
