03. Increase your ability to earn
In other words, develop multiple streams of regular income.
What ever you do: 8-5, Freelancing, own a business, Sales agent, etc. What ever you do, it is not sufficient to rely on just one source of income.
You cannot afford to put all your eggs in one basket. A single or very few sources of income puts a limit on how much money you can make. Imagine getting paid only 12 times in a year (most of us know this story).
Firstly, if you don’t earn enough to cater for your needs, you can’t even “pay yourself”. If you try to, you’ll end up breaking it.
what happens when your one stream of income dries up?
You get the gist.
Learn as many new skills as you can; in today’s world, you can learn virtually anything and start a side hustle with little or no capital at all.
Research has shown that- the average millionaire has up to 7 streams of income.
I believe the business term for this concept is “diversification”.
Having multiple streams of income exposes you to lesser financial risks and puts you in control of your finances.
Essentially, income earning opportunities are of two categories; active and passive.
a. Active Income
This is the case where you’re physically involved in the activities that generate income for you. It mostly is centred around paid employment; where you work for an entity and get paid “wages” or “salary” (you know they’re are different right?) after a certain period; examples include working in a: bank, an NGO, an Oil and Gas firm (oye money 😉), a Telco, etc. Here, you’re an employee.
Also in this category, you could go as far as being self employed- you still engage in the physical activities, but you do it for yourself, not an entity; you are your own boss (C.E.O 😁), you call the shots. This is where you’ll find Consultants, Freelancers, E-commerce people, etc.
While there’s good money to be made in this category especially since you’re your own boss, the major downside could range from being overworked, excessive stress and inadequate relaxation time.
b. Passive Income
In this case, you’re not actively involved in the running of the business. Mostly, what you do is make decisions and give direction.
You could be a business owner, who hires people to do the physical job, and then pay them periodically. This is where you become the employer.
Another way of earning passive income is to be an investor. You can invest in financial securities: shares, bonds, bills, etc. You could also invest in real estate, or be a Venture capitalist.
The highlight of earning passively is that you get to have enough time to live life and do other stuff that matter to you; I mean, who doesn’t wanna travel the world?
04. Put your money to work
So you’ve paid yourself regularly for a while, your budget is shrinking by the day, and you’re constantly maintaining a surplus balance. You have multiple sources of income, and this money just keeps trooping in (I love the sound of that, 😀).
Basically, you have money!
What then do you do?
Put your money to work!!!
This is the part where you make money while sleeping (exciting huh, lol)
You can’t afford to stack those Bills and just watch them. You have to make em grow,
You know how they say a 100 bucks 5 years ago, is not the same as a 100 bucks today? It’s true! Mostly, it’s worth lesser than it did some years ago, in some cases, even in months; yeah! I’m saying you your 100 bucks could buy you X,Y and Z a few months ago, and today you can only afford X and Y with the same 100 bucks (Or X and a Y without the tail 😂). This whole situation is described by a concept referred to as inflation, which is a consistent rise in the general prices of goods and services in an economy (ECO101🙂)
Beyond inflation, having idle funds exposes your finances to jeopardy; as you might end up spending frivolously.
So, how do you ensure; that the value of your money does not get eroded by inflation or you don’t set your self up to spend like a prodigal child and end up regretting…
LET YOUR MONEY WORK FOR YOU!
You see, as long as we’re talking about financial independence, the need to invest cannot be overemphasised.
Don’t make the mistake of thinking you need to have a whole lot of money before investing; it’s a wrong mindset. Investments are very versatile, and there’s a host of options available
depending on your principal (basically, the amount of money you want to invest), and your risk appetite. From treasury bills, bonds, fixed deposits, stock, to mobile farms and real estate. I’ll dedicate an entire post to these available investment options later.
Most of these investments are sources of passive income, you don’t really have to engage in any work, hence “putting your money to work” (Think about it… 😁). You might have to do some research though, and some form of risk analysis, but that’s not a biggie at all, and it doesn’t require any special skills. Moreover, The Money Guy™️ is always here to make recommendations for you.
There you go- the 4 simple steps to financial freedom; albeit they’re simple, this stuff is ancient wisdom that has been proven to work, over and over again.
Sometimes later I’ll be glad to know how well these steps have worked out for you. Do not hesitate to share.
Do you have any thoughts you want me to write about? Please fell free to share in the comments section.