What is the difference between being rich and having financial freedom? Are they not the same thing in different semantics?
There is a definite cross, but let’s get a more layered description of the two concepts.
In my 30 years experience of dealing with clients, I have gained a few insights. In my early years as a financial planner I compared being rich to having luxury lifestyle and being financially free. Assets and wealth were perceived to be the be all and end all. Being rich in a material sense can be a façade, funded with debt and laden with ego nonsense. Being materially rich with the richness tied up in assets, I.e. property that you live in is all good and well while we are earning and have regular income from our work.
Personally, I have made and lost fortunes in my life and I have witnessed people in my community make critical business decisions than have wiped out their fortunes within weeks. So, in many cases money comes and goes (morality comes and grows). At some point I changed my perspective to focus on the lifestyle that suits my tendencies and personality. I decided to focus on living a lifestyle of values and build cash flows that are sustainable. “Being Rich materially” was dropped as a goal. Being of value to myself, my family and community became part of my financial freedom equation.
I attended many seminars and training sessions regarding the topic, combined with working with pension fund members, I realize that understanding cash flow and building it sustainably is the path to financial freedom. The asset managers invest in companies that regularly pay dividends.
Cash Flow is KING.
I read a description of financial freedom I resonate with that goes as follows: “Financial freedom is the state of not being imprisoned or enslaved.”
Our consciousness and awareness is where we perceive the power to reside. Debt can be described as modern slavery or financial imprisonment. Too many modern individuals have abdicated their personal power to money. There is a belief that to create a business we first need capital and money. This capital is important, but the power to make the business a success resides with the individual.
Being financially free is a journey, not an instantaneous event.
I have seen lotto winners worse off after four or five years because the money granted them a temporary feeling of power without the need to develop it as an individual, when the money fades , so does the power and the individual is left in an oversized shell filled with voids of uncertainty once filled with cash. On this journey many of us, if not all of us, will make mistakes based on bad decisions. The way we learn from those decisions are what grants us the opportunity to develop our individual power.
As I work and engage closely with members and measure their journey towards financial freedom, I observe that a bigger salary does not translate into more savings, usually it just translates into more consumption and larger debt.
The best example of financial freedom I have witnessed recently is that of the clients of Saveact (NPO).Over a ten year period members of savings clubs, who started saving on their meagre SASSA grants , have become multiple business owners who could build their houses debt free.
Think about that. People without jobs have saved to become financially free.
Saveact is an amazing organization because they prove that the real power lies within the individual.
For each of us the journey is different. Large salaries and massive lotto winnings do not guarantee financial freedom. Poverty and living on a grant does not prevent you from building towards financial freedom. Having a plan and a strategy is going to take you on the road to financial freedom.
Our greatest obstacle to achieving financial freedom is not what happens on the stock market or how much we earn, it is our own habits.
It is in having a plan and strategy in place.