Why Earning More Doesn't Always Mean Financial Freedom

Why Earning More Doesn’t Always Mean Financial Freedom

Financial freedom is a goal that every one of us strives to attain. However, it is one word that many people often misuse. While financial freedom would typically mean different things to different people, one common misconception people have is that they tend to equate it to earning more which is, in fact, not true.

If it were so, there wouldn’t be as many high-income earners struggling with debts and living from paycheck to paycheck as there are today, and you would have met such persons at some point. In this article, we will explore the true meaning of financial freedom, why earning more does not guarantee financial freedom, and the steps you can take to achieve true financial security.

What is The True Meaning of Financial Freedom? 

Financial freedom means having enough financial security asides from your regular salary to afford a specific type of lifestyle that you desire for yourself and your family. Financial security here implies a combination of savings, cash at hand, and other investment that serve as a surety such that you can retire or choose to focus on the things you enjoy without any money worries.

It’s no news that many spend their lives working jobs they hate, while others spend most of their time on their careers, not having time to spend with their loved ones or other interests to make ends meet. Some benefits that being financially free offers include;

  • Reduces the stress that comes with worrying about money
  • It gives room for personal autonomy in terms of being able to make choices without money constraints.
  •  Building wealth and achieving financial freedom provides a safety net for the future. It can help you prepare for emergencies, unexpected expenses, and retirement.

Financial freedom offers a way out of this rat race since instead of working for money; you have your money work for you through different investment vehicles.

Debunking the Fallacy of Earning More

Earning More money is not the same as achieving financial freedom. While making more money would give you more funds to direct to the fun lifestyle you desire or help make investments, financial freedom is a more long-term and intentional goal.

According to CNBC, 63% of Americans, including 6-figure earners, live from paycheck to paycheck. This suggests that some factors prevent many of us from being financially free. 

So if you’ve been waiting to get a better-paying job or a high-paying side hustle, you must understand that these do not automatically guarantee financial freedom, and here are some reasons why;

1. Lifestyle inflation

Living below your means might seem daunting when you earn a very high income. But, ever noticed that when you make more money, new expenses that you never thought existed would come up, or you are likely to increase the amount of money you used to spend on certain expenses? More like your expenses automatically rises to match your income level. 

2. Lack of Financial Literacy 

Most of the time, we assume that most high-income earners have more savings at their disposal, but most of these people struggle with bad money habits. This reinforces the statement made by personal finance Author Robert Kiyosaki that most people do not realize that it’s not how much money you make but how much you keep. 

Most people need help tracking their expenses and putting money aside for savings, which often results in them blowing off all the money they’ve managed to earn. 

3. Debts

While debt is a great tool you can leverage, it can ruin your finances. Here’s how; imagine getting a high-paying job and still having a debt you’re repaying. This can restrict your financial freedom. Also, most people borrow more money, thinking they always have money to repay. Unfortunately, when you spend most of your cash repaying debts, it becomes impossible to have enough to direct at taking steps to attain financial security. 

How To Achieve True Financial Freedom

Financial freedom is a long-term and intentional goal of achieving financial security, which would require implementing some steps over time to keep you on track.

1. Saving

Saving is the foundation of financial freedom. While you don’t have to earn much money to start saving, you could put aside at least 10% of your monthly income on a savings platform and still earn interest over time. You would be surprised at how much you accumulate when you stay consistent with your savings. If you struggle with saving, consider using our Autosave feature to automate your savings. The best part is that you can earn up to 10% per annum when you save towards specific goals on Earnipay. 

2. Practice strict budgeting 

Setting and sticking to a budget would help you achieve your financial goals faster. While this does not mean depriving yourself of any form of luxury, it would help a great deal in preventing impulse spending. To make your budgeting journey easier, consider using our Autopay feature. 

3. Invest in Financial Literacy

Budgeting to meet your saving goals is only part of financial freedom. You must know what to do with the money to make it work for you, and this is where financial literacy comes in. Consider signing up with Money Africa or our Learn product. 

4. Start Investing

This is important in growing your money and making it work for you. Once you’ve learned the basics of starting your financial journey, it’s time to start investing. 

One tip for investing is to avoid putting all your savings into one form of investment. Instead, sharing it across different investment vehicles like mutual funds, ETFs, real estate investments, mutual funds, stock markets, and even cryptocurrency would be best. Also, consider getting a financial investor to guide you. 

Final Thoughts 

Understanding financial freedom is the first step to achieving your financial goals. While earning a higher income would help, it is only one piece of the puzzle. So, to achieve true financial freedom, focus on being financially literate and set financial goals for your life, then take active steps like saving, investing, and avoiding debts in achieving it. 

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