MyMoney Online

Financial Fitness: 3 reasons why you will never be financially independent

Image: girlsjustwannahavefunds.com

Financial Independence is achieved when your investments reach a point where they can generate sufficient income for you to live off. It puts you in a space where you don’t need to earn an income any more. It empowers to to do the things you really want to. Many of us don’t get anywhere near being financially independent. We, instead, assign ourselves to having to work for as long as possible compromising on our standard of living along the way. Here are some reasons that stand in the way:

1. Living it up

If you are borrowing to maintain your lifestyle your standard of living is too high relative to your income. You should be able to service your debt comfortably after having firstly set aside the appropriate amount for savings.The cost of your total debt should not exceed 30% of your monthly income. If it is higher then you probably should be living in a smaller house or driving a cheaper car. The higher your debt the more you are paying the bank instead of yourself. The opportunity is lost in diverting interest repayments to compounding investment returns.

2. The idea that we will all make it one day

Many of us dram that one day in the future we will strike it rich in some business or win the lottery. We then don’t see the need to save along the way which ends up in starting to save to play catch up and often ends up being too late. The only realistic way to have a chance of building enough capital is to take full advantage of compounding. The sooner you start saving the less it will cost you as the power of compounding increases exponentially the longer you save. Its the only magical way to reach financial independence, but it does need time to make it happen.

3. Ignoring the value of money

Image: blogordietryin.files.wordpress.com

Ignoring the value of money now and into the future will stand in the way of being financially independent. Many of us are more ready to spend now rather than save for the future. Think how hard it is to earn your money and how easily you seem to part with it. As the costs of living rise into the future the value of your money needs to keep pace to compensate. Furthermore, your investments need grow ahead of inflation if you want to get wealthier and set you on the path to financial freedom.The future cost of living needs a hard and honest evaluation especially with the essentials like medical aid, electricity and even water. Just these three necessities alone will take a huge slice out of your income needs into the future. The value of your money is important now but will become even more so into the future if you truly want to become financially independent.

Paul Roelofse, Certified Financial Planner® presents 'Financial Fitness' on Radio 702 and Cape Talk on Weekend Breakfast with Africa Melane and Azania Mosaka on Sundays just after 08h00. Visit http://www.investforlife.co.za/ for more.


This article first appeared on 702 : Financial Fitness: 3 reasons why you will never be financially independent


Recommended

by NEWSROOM AI

CapeTalk welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the CapeTalk community a safe and welcoming space for all.

CapeTalk reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

CapeTalk is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
Need a loan? How to improve your credit score (before you apply)

Need a loan? How to improve your credit score (before you apply)

Get a free credit report, then follow these five tips and see by how much you can improve your credit record.

5 rubbish beliefs about investing that are keeping you from getting rich

5 rubbish beliefs about investing that are keeping you from getting rich

Financial advisor Warren Ingram rubbishes some popular, yet blatantly untrue ideas that are keeping people from growing wealthy.

How to make your first R1 million (after that it just becomes so much easier)

How to make your first R1 million (after that it just becomes so much easier)

Rich. Wealthy. Financially free... Call it what you will; the first million is how you get there. Warren Ingram on his book...

Living together, but not married? Tips on arranging your finances…

Living together, but not married? Tips on arranging your finances…

Personal financial advisor Warren Ingram has advice on keeping the money side of the relationship healthy when shacking up.

Drowning in debt? You may be able to refinance (but there are pros and cons)

Drowning in debt? You may be able to refinance (but there are pros and cons)

Galileo Capital Financial Advisor Warren Ingram on "good debt", "bad debt", "neutral debt" and consolidation your debts into one.

2 best companies on the JSE to invest in now (by Nefg Fund Managers)

2 best companies on the JSE to invest in now (by Nefg Fund Managers)

Not sure which shares to buy? Bruce Whitfield interviews Gerbrand Smit, Chief Investment Officer at Nefg Fund Managers.

Popular articles
First-ever CT shooter gets probation thanks to ShotSpotter gunfire tech

First-ever CT shooter gets probation thanks to ShotSpotter gunfire tech

The City of Cape Town welcomes the first-ever ShotSpotter-linked conviction and sentence, handed down this month.

Damning audio of Tom Moyane instructing Sars official to fake illness emerges

Damning audio of Tom Moyane instructing Sars official to fake illness emerges

The instruction from Moyane to the official was to allegedly avoid speaking to KPMG investigators during 'rogue unit' inquiry.

Woman exposed for calling fellow aircraft passengers the K-word

Woman exposed for calling fellow aircraft passengers the K-word

Reverend Solomuzi Mabuza says he is considering laying charges against the woman for calling him a ka***r.

Why Ethiopian Airlines (not SAA) is Africa's biggest and best airline

Why Ethiopian Airlines (not SAA) is Africa's biggest and best airline

State-owned (but not managed) Ethiopian Airlines is profitable. Bruce Whitfield interviews Africa correspondent Lee Kasumba.

Willemse will take Supersport to Equality Court over walk-out findings

Willemse will take Supersport to Equality Court over walk-out findings

On Tuesday, SuperSport released the findings of an investigation by Advocate Vincent Maleka.

Career sabotage and an alleged 'sex pest' CEO - Grant Thornton's culture exposed

Career sabotage and an alleged 'sex pest' CEO - Grant Thornton's culture exposed

Former director Nerisha Singh says Grant Thornton SA sabotaged her job prospects after speaking up about sexual harassment claims.

46 women rescued in Joburg sex trafficking raid

46 women rescued in Joburg sex trafficking raid

An expert on human trafficking explains how the syndicate operates and how women are lured into dens.

Max du Preez opens up about money (and losing everything on Vrye Weekblad)

Max du Preez opens up about money (and losing everything on Vrye Weekblad)

The Money Show’s Bruce Whitfield interviews the famed and fearless journalist about his money history, hopes and beliefs.

This video doorbell lets homeowners check on the front door from their phones

This video doorbell lets homeowners check on the front door from their phones

On Technobyte this week the traditional doorbell goes hi-tech, Uber wants to fly you and Google is launching an AI lab in Ghana.