7 Habits to reach financial freedom

When it comes to your finances, it’s important to be consistent – and that’s exactly what habits are all about. But how can you be sure that you’re practising habits that will lead to financial freedom?

We have a look at what financial freedom is, and we identify seven positive habits that you should follow as part of your routine.

Tip: Regularly checking your credit score is a great financial habit. View yours with JustMoney.

Financial freedom defined

Julie Macleod-Henderson, head of retail investment in Kwa-Zulu Natal and East London for Foord Asset Management, notes that financial freedom is about living within your means, being a bit more frugal, and making sure that you are spending your hard-earned money wisely.

She says that financial freedom is something that every individual should strive towards. “Not only does it help you take ownership of your finances, but it also allows you to take ownership of your life and to help others by giving back,” she says.

Follow these habits to create financial freedom

We selected the seven most important financial habits for achieving financial freedom, from a pool identified by Macleod-Henderson and two additional financial experts.

1. Respect money

Macleod-Henderson says that respecting money will result in less wastage. “Have a hard conversation with yourself and understand what your spending habits are,” she says. “For example, consider whether there’s a pattern of spending money on items that you don’t need.”

By spending less, she believes that the following two things will work in your favour:

• You’ll have more money to put aside to achieve financial freedom.
• You’ll learn that you actually need a lot less in order to survive, which will help you to increase the amount of money you can put aside.

2. Buy experiences, not things

Macleod-Henderson says that if the past two years have taught her anything, it’s that life is short, and it shouldn’t be about hoarding.

“It’s critical to make provision for your future, but you are also allowed to enjoy your life. This, however, does not mean spending carelessly. Life is made up of moments and experiences, and not by the number of products you own,” she says.

She believes that, ultimately, you will remember the quality experiences you’ve had by spending time with friends and family.

3. Set a life plan and goal

Pat Magadla, senior business development manager at Old Mutual Investment Group, says that, as with most endeavours in life, to achieve success you need to set a clear roadmap to your desired destination.  

“This means that you should set short-, medium-, and long-term goals and keep track of them so that you can be held accountable to your future,” she says.

4. Live below your means

If there is a single secret to financial success, Magadla says, it would be to live below your means. “To ensure wealth creation, we all need to spend less than what we earn.”

However, she explains that it’s easier said than done. You need to beware of lifestyle creep as your earnings increase and, if you spend less than what you earn, it frees up your income which can then be directed towards your savings. This requires consistency and dedication.

5. Start investing

Magadla says that there’s never a perfect time to start investing, or a perfect amount to start investing with. “A simple principle is to start today with as little as you may believe you have,” she says.

She explains that investing secures your future, and you have many investment vehicles to choose from. For as little as R500 a month, you can invest in both local and international shares listed on the stock exchanges, via a unit trust.

“It’s also a completely transparent investment. You will see exactly where your fees are going and how your investment is performing,” she says.

6. Build on your financial education

Juan Oliver, co-founder and director at Muskcoin Crypto, says that the old adage about teaching a man to fish as opposed to giving a man a fish, relates particularly well to investing.

“Do your research and equip yourself to make better financial and business decisions. Don’t be wary of spending money on a course, workshop, or networking event. It will pay off,” says Oliver.

7. Pay it forward

Oliver says that you should learn how to give, and make sure that you keep on giving. “It may seem contradictory when you are trying to save. However, through sharing, you change your mentality from need-minded to seed-minded,” says Oliver.

He explains that a person who has an open hand can also receive when their turn comes. It changes your mentality from having a shortage to an abundance.

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