Change how you manage your money to be financially free – expert

For many, the rising cost of living means attaining financial freedom remains a dream.

Financial freedom is when you have enough savings and investments, and you can afford the lifestyle you want for yourself and your family. You must be debt-free.

But for a lot of people, most who live from pay cheque to pay cheque, this is not possible. However, our financial struggles should not deter us from achieving it. With small changes and adjustments where we can, we can at least take the first step.

“In a country still grappling with inequality and an unforgiving cost-of-living crisis, the concept of financial freedom can feel like a pipe dream for many. According to the National Credit Regulator, debt is rising, standing at R2.3-trillion, and inflation eats into our every cent. The result? Many South Africans are free, but not financially,” said Momentum financial adviser Jackie van Wyk.

“Financial freedom isn’t reserved for the rich – it’s a right that all South Africans can and should work towards. And just like our country’s struggle for political freedom, the journey to financial independence starts with awareness, discipline and small, bold steps.”

Van Wyk says financial liberation is also about changing how we manage the money we have.

“Breaking free from financial stress means avoiding the most common money mistakes, such as not learning enough about personal finance, living for the moment instead of planning for the future, spending on wants over needs, ignoring your spending habits, not having clear financial goals, thinking wealth is for other people and avoiding advice when you need it most.”

PSG Wealth head of sales Thomas Berry says achieving financial freedom also “involves understanding how our behaviours and thought processes shape our financial choices”.

“It is ingrained in our nature to compare ourselves to others, and there is a tendency to equate financial success with the vehicles we drive, the places we live and the lifestyles we lead,” he says.

“However, true wealth lies in being able to control one’s time and make choices without financial stress. Those who accumulate wealth over time understand the value of living within their means and prioritising savings. This simple shift in mindset can empower individuals to achieve long-term financial freedom.

“Achieving financial freedom is not solely about increasing income or making the best investment decisions; it also involves understanding how our behaviours and thought processes shape our financial choices. Pioneers in behavioural finance, Amos Tversky and Daniel Kahneman, have shown that humans do not always act rationally when it comes to making sound financial decisions.

“Their research reveals that cognitive biases, including loss aversion, mental accounting and the illusion of control, can lead us to make suboptimal financial decisions.”

Berry says achieving financial freedom includes developing a mindset that supports and promotes long-term financial wellbeing.

“Humility, patience and discipline with money create a foundation for success. Embracing these psychological principles allows you to shift the focus from short-term gratification to long-term security, ultimately providing the pathway to financial freedom,” says Berry.

Van Wyk says one should budget like your freedom depends on it.

“Every rand should have a purpose – be it for groceries, savings or debt. Tracking your spending gives you power. Even R100 a month is a start. Savings build the cushion that gives you breathing room when life throws you a curveball.

“Whether it’s for a child’s education, your first home, or retirement, make your money work for you. High-interest debt is the financial equivalent of chains. Prioritise paying it off to free up your future cash flow.”

PSG Wealth gives these tips to help you achieve your financial goals:

Live within your means: Avoid unnecessary lifestyle expenses and prioritise savings over excessive spending.

Invest early and consistently: Time in the market is more valuable than timing the market. Start saving as early as possible with a debit order every month, as this is a good way to create savings discipline.

Avoid emotional financial decisions: Patience and discipline are crucial aspects when striving for financial freedom. Think before panic-selling during unfavourable market conditions or chasing trends to make a quick profit – stick to a well-thought-out plan.

Build up emergency savings: Having an emergency fund ensures that unexpected expenses such as medical bills or a vehicle emergency, don’t derail your long-term financial plan and provides you with peace of mind that you have funds available if such a need arises.

Stay educated: Financial literacy is imperative to understanding the basic principles of investing, taxation and risk tolerance, empowering you to make better decisions.

SowetanLIVE