On financial freedom

My latest obsession is financial freedom, a term you hear tossed around a lot, especially in the world of those trying to help people get rich.

The predictably long introduction that gives you more background information than you want (or need):

My family is lower-middle class: both of my grandfathers were farmers in Nigeria. My parents did not grow up in houses with plumbing (typical, I imagine, for their generation in Nigeria) and even today, my grandparents live in pretty much the same conditions as they did 30 years ago: their houses do not have an indoor kitchen or indoor plumbing. I think most of my grandparents’ contemporaries own or inherited a home.

My dad worked for six years after finishing high school before coming to North America to study. If he had not received a full scholarship he would have kept working with a goal of earning enough to go to a good school because his love of learning and his belief that it (knowledge) would lead to freedom were the driving factors in his pursuit of higher education. But back to the point of this entry: money. After my dad finished his schooling, and after my parents concluded that their four kids might be best served staying in Canada, given the uncertain economy in Nigeria, they entered into what I’ve always called a typical immigrant experience. Those early years were coloured with extreme budgeting and stretching money as far as it could go. Second-hand shops were known to us. My parents’ strong work ethic led to them work as much as they could but they always put us children first: we never had babysitters because they didn’t have family to watch us and they couldn’t trust strangers with their most precious possession. They just worked their schedules around us until I was old enough to babysit.

My parents rented various living spaces for us in different cities until they bought a house in 1998, shortly after my dad got a permanent job with a secure employer. They’re about halfway through paying their mortgage I think, and given their ages (late 50s/early 60s) they are years behind their Canadian counterparts, who have paid off their homes by that age.

If I asked my parents, I think they’d say that their financial situation has improved from those early days in Canada. I feel bad that they’re still working so hard without feeling like they’re making quick progress. I don’t think they’ll feel comfortable retiring until they’ve paid off the house but I don’t want them to physically work so hard anymore. But God has been good and we have been blessed. Every parent dreams that their children will be able to live a better life than their own, and have more money or material possessions with which to do it, and my parents are no different. When I bought my house (I have a 25-year mortgage, of course!) just before I turned 30 years of age, they were very proud and happy for me. When I bought a new car last year (to be paid off in the next 4-5 years hopefully!), they were again pleased. They (and I) hope that my siblings will be able to do even better when the time comes.

But the ability to do these things comes down to money. I definitely didn’t have the money to pay for either of my purchases in cash, but it was important for me to make a significant downpayment on the house. If my dad hadn’t encouraged me to invest whatever I could starting in my late teens, and if I hadn’t schooled in the same town that my parents lived in, I would probably have had a lot more debt than I had when I finished school, and buying a house or a car would not have been possible until I paid off my debt. Although my parents didn’t pay for my schooling, they provided me with a safe and secure home in which to live, which allowed me to save the money needed for the downpayment (after paying off my student loans). The good example they set with living within their means rubbed off on me and I learned how to be disciplined enough to manage my money in a way that I could pay my bills once I was living on my own.

What was the point of this entry again?
So back to my newfound interest in financial freedom. I was complacent because I thought I was doing well: I have a plan in place to pay off my house in a little less than 25 years and I increased my bi-weekly payments at the end of the last year so I can pay off my car sooner. But could I do better? I never thought to ask that question until near the end of last year because I was satisfied with my efforts. After getting inspired by a colleague’s examination of her finances I decided to look at my own. That led to me reading The Automatic Millionaire: Canadian Edition: A Powerful One-Step Plan to Live and Finish Rich this week and after that I was inspired do more. The original book was written for an American audience so those of you who are interested can check it out.

The information the book provides is very practical. The first principle is to “pay yourself first”, and take advantage of the opportunity to make contributions to your RRSPs (retirement savings, the Canadian equivalent of the 401(k)) before taxes are taken off your income, reducing your taxable income. The “automatic” part of the plan is to set up everything—contributions to your savings and payment of debts—as automatic withdrawals or transfers, so that you don’t have to count on yourself to be disciplined: just set it up once and everything happens by magic.

One of the examples given in the book is of a couple who bought a house, paid it off as soon as possible, bought another house and kept the first home as a rental property, the profits from which were no doubt used to pay off the new house as soon as possible. Guess what? I want to do the same thing! Owning more than one piece of property wasn’t something I ever aspired to—I’d be happy to own one—but when you read a book like that it’s hard not to be inspired to make your money work hard for you and make things like this happen.

Nigeria versus Canada (or the USA)
One thing I like about home ownership in Nigeria is if you say you’ve bought a home it’s actually 100% yours in most cases: you can build your house at your own pace and when it’s finished there’s no mortgage to worry about. If I had to wait until I could pay for a house in cash before buying, I’d never be a homeowner! The interest I’ll pay at the end of the whole thing is annoying to think of, but the only way to minimize interest payments on a mortgage is to pay it off as fast as you can.

I don’t know if the Nigerian government has programs to encourage Nigerians to save for their future. I think some employers must offer pensions that are paid to the employee upon retirement but I really don’t know if that’s the case. I also don’t have a good sense of the general attitude toward money in Nigeria, especially saving for the future so please educate me:

  1. What is the general feeling among Nigeria-based Nigerians about saving for the future, debt, and being economical?
  2. What is your approach to money: Are you frugal? Do you invest? Are you dealing with debt?
  3. What are your future goals with regard to financial freedom? Do you have a plan to get there?

If you’re lucky enough to be employed, I hope you’ll think about saving some of your earnings for your future, both long-term and for a rainy day. If you’re in debt and feel hopeless about the future don’t! I promise you that with consistent work to pay down what you owe, it will go down. You will and can get financially free.

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14 thoughts on “On financial freedom

  1. I'm obsessed with financial freedom too! Especially as someone who struggled to get through school because of money and graduated with student loan debt.

    I've always wanted to own multiple properties, live in one, and rent the rest so I think it's definitely a good idea.

    I definitely don't want to have any children until I'm financially secure or I'll just be compounding my problems.

    Good for you!!

  2. What is your approach to money: Are you frugal? Do you invest? Are you dealing with debt?

    We have a joint account for the family and try to be as frugal as we can, but mostly by living within our means. Luckily the only debt we have is the mortage.

    What are your future goals with regard to financial freedom? Do you have a plan to get there?

    Investing, and more investing. :)

    I totally love the idea of financial freedom and like the way you summed it up.

    • Mortgage debt is the only good debt so kudos for only having that, Myne (and Atala!).

      Oh, investing! :) I guess it's the only way to reach that goal of financial freedom, isn't it?

      I wish you all the best in your investments :)

  3. just wondering why cant you and our siblings help your parents with the mortgage even if it is $100 each a month??? especially those living at home that would go a long way in helping them clear it faster….my aunt charged my cousins rent as soon as they were old enough and had steady paycheck it was little $200 a month but it helped a great deal in clearing her mortgage

    • My sister and I have helped, though I have not done anything significant since I started my own mortgage almost three years ago. I'm always looking for opportunities though! Most (Nigerian?) parents won't want to charge their kids rent like your aunt did but I think it's a good idea, as long as the child has the income. In cases where the child is working in order to earn money to pay for school and some spending money, I think the parent can decide not to charge.

  4. good post. it is good to have goals and challenges that also include money.
    financial freedom is my goal also and i am also into investing and taking care of my money as best i can. good luck with the 2nd house purchase when that happens.

  5. Another thing to consider is this: Labour in Nigeria is probably a lot less than in Canada or the US so it's a lot easier to buy a plot of land and hire people to help you build it without costing you an arm and a leg. This is the case in many countries – it isn't abnormal, for example, for middle class families in Hong Kong to have live-in help (usually a foreign woman who will work as a housekeeper and nanny).

  6. Love the idea of financial freedom. That's the reason I work so hard and now thanks to you about to get off blogsville for the night and work on that marketing plan!. Sounds like a really good book, thanks for sharing!

    • Good for you! I'm sure you could teach me a few things about being financially savvy and being a business owner, to boot! I hope all goes well with your marketing plan work…I'm sure you've got social media on the list!

  7. Financial freedom is definitely on my list of goals too. Like Myne and Atala, hubby and I also have a joint account from which we pay most of our bills. We also definitely live within our means and don't buy stuff we don't need or can't afford. Having a property portfolio is also part of our short to long term goals.

    Thanks for the book(s) recommendation.

    I don't live in Nigeria now, but compared to the UK, USA/Canada etc. Nigeria is a cash-based country and not a credit based one, so it's probably a bit more difficult for the working class to buy/build their own homes at young ages, unlike over here where mortgages and credit facilities are more readily available and accessible…

    But when you consider the fact that the taxes over there are not as ridiculous as they are over here, then, it's probably easier for them to save up faster than we can over here.

    I hope I haven't succeeded in contradicting myself or confusing you…lol.

    Thanks for the post GNG.

  8. I think Financial Freedom means something different to everybody. For some people, it may mean having lots of assets, for some it may mean having enough saved for retirement, for others it may mean cash in the bank to spend on anything they want.

    It's definitely something I'm aiming for as well. I want to live debt-free, I want to be able to afford things I want and need without borrowing and I want a financially secure future. I'm working towards these goals slowly.

  9. I am super late on this but I also told myself I want financial freedom. For me I was lucky and got a full scholarship to school so I came out with no debt. My first two cars were paid in cash. I plan to never buy a car unless I can pay it in full and if you go to the auctions it is very doable. I also plan to only rent until I am ready to move back to Nigeria and build my own house. I think the mortgage system in the US is a bit absurd and they want you to believe that investing in a house is the way to go. After reading books like I will teach you to be rich I learned a lot about independence. I am happy for you and I hope more women are aware of their finances : )

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