The 5 Steps To Financial Freedom

Written by: Leila Juma

Edited by: Alfred Mazera

I bet we’ve all heard of financial literacy before right? What is the first thing that comes to your mind when you hear of financial literacy? Well, my first time, the thing that clicked on my mind was having the know-how about your finances. Well, that’s what I thought at least. And so many of us claim to have financial literacy but in the real sense, we don’t. I am one of those people. And sadly I never really was interested until when I started my small businesses and that’s when it hit me that I was clueless when it came to that subject. And truth be told my businesses suffered.

So what is this thing called financial literacy?

Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.

Okay now, why weren’t we taught this in school? I wonder. These skills are so very important in our day-to-day lives. I wish I was taught all this back in high school but life experience is the best teacher they say. However, it remains important that schools need to include this in their curriculum. It would save too much heartache.

Financial literacy includes understanding how a current account works, how to operate a credit card and how to avoid debt, something we clearly fail at. And most times financial

literacy has an impact on families as they try to balance their budget, buy a home, fund their children’s education, and ensure an income at retirement. Research states that the lack of financial understanding has been signaled as one of the main reasons many people face problems with saving and investing. Now it’s never too late to kick start your journey on financial literacy

These are some of the steps to take to jump-start your journey

• Identify your starting point. It can be difficult to plan yourself for next year, five years from now, or even ten years from now if you don’t know where you are financial. It is best to calculate your net worth; the difference between what you own and what you owe. By doing this, it will either inform you that you’re doing well or be a wake-up call that you’re falling off track.

• Set your priorities. We all have priorities in life, don’t we? And they can be classified as either need or wants. Needs can be defined as the things that one must have to survive whereas wants aren’t really necessary for survival that you might want. Now it is very important to make a distinction between the two to distinguish them when making spending choices is very important and can make a huge difference. So it’s very important to come up with a list so at set your financial priorities. This list could also include your goals.

• Document your spending. Coming up with a budget is very important to figure out your cash flow; what comes in and what goes out. It will force you to put down on paper all your income and expenses. It could also be a real eye-opener towards your spending habits. It’s also an important tool for helping one meet their financial obligations, how and in the future.

• Pay down your debt. Debt can be emotionally draining on both individuals and families. And can also hinder financial goes. While the best strategy is to completely avoid debts but just in case you’re in one I will take you through the strategies to pay down and get out of debt from acknowledging your financial missteps in my next article so be on the look.

• Secure your financial future. Once you develop a financial plan it is much easier to secure your financial future. You can’t always control when you’ll lose your job or suffer an illness or an injury that could be a reason for career loss. Planning wisely on how to save and investment choices could be one of the best ways to secure your financial future.

Even if you didn’t learn money skills at home or school, it’s never too late to catch up. It’s important to be proactive about developing your financial literacy. Be able to re-align your focus and adjusting your finances now will make all the difference for your future.