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How to Become Financially Independent in South Africa

Most people only dream of becoming financially independent. But not everyone will achieve FI. The reason for this is that most people don’t commit, don’t believe it’s possible or they plan poorly. If you’re serious about achieving financial independence, you’ll have to define what that means to you and acknowledge where you currently stand financially. How do you become financially independent in South Africa? 

Financial independence is half of the F.I.R.E. (Financial Independence Retire Early) movement. 

The FIRE movement is a lifestyle change that focuses on setting goals and reaching those goals over time. 

The majority of people want to reach financial independence because they lack financial security. 

Having enough money allows you the opportunity to do what you want. You can work wherever you want, try something new, take a break or work on your hobbies. The possibilities are endless…  

Being financially independent does not mean you have to retire early; it just means you’ve reached financial freedom. 

You’re in full control of your life and you get to design it the way that makes you most happy. 

Here are some tips to help you become financially free. 

What does financial independence mean to you? 

Financial independence is a personal journey and you get to decide what that journey looks like. It should not be about retiring early or be about money and wealth either. 

FI is much more than just money, wealth, and bragging rights. 

Being financially independent is about the freedom to do what you want.

Defining what financial freedom means to you, really comes down to happiness

The more you think about and investigate financial freedom, the more you’ll realize that money is only a tool. You’ll realize that you can do almost everything that makes you happy, without money. 

Spending time with your family and friends, enjoying your job, walking the dogs, exercising etc. These things don’t cost a thing. Most of us find happiness with things that don’t cost anything. 

The first step to financial independence is to define what makes you most happy. Chasing after money might lead to an unfulfilled life. 

Financial independence comes down to several sub-goals, rather than a grand financial strategy. It opens up new possibilities for yourself and offers stress relief along the way. 

Goals relating to financial independence:

  • Define happiness
  • Becoming debt-free 
  • Building an emergency fund
  • On track with your retirement plan 
  • Pay off your mortgage 
  • Earn enough to save money, pay all your bills, and still enjoy life. 

You should have your sub-goals and define what they mean to you. 

The more specific you are about these goals the easier you’ll reach FI. Use these goals as a stepping stone to reach your financial independence. 

Create a financial action plan

Once you’ve defined what financial independence means to you and you’ve established your goals, it’s time to create an action plan. 

Take a look at your financial situation and determine which goals you need to tackle first. 

For example, you want to increase your savings rate from 10% to 30%. To do this you can start a side hustle and earn more money, or you could get rid of all your debt and free up some cash. 

Once you’ve paid off all your debt you can save a lot more, and still have a side hustle. 

Paying off your debt should be the first goal on your financial plan. 

Bad debt not only costs money with interest and fees, but it can also slow down the rate at which you will be able to achieve financial independence.

The key is to accomplish goals that are most achievable right now and that will benefit your future goals. 

No plan is worth creating if you don’t implement it. So put your financial independence plan to act as soon as possible. 

You don’t need an elaborate plan to get started. All you need is your next best move and start from there. 

Adjust your spending habits 

If you’re serious about reaching financial independence, you’ll have to change your spending habits. 

Tracking your expenses will help you identify your spending habits. You’ll be able to see where you’re spending too much money and be able to cut costs. 

Once you start cutting costs in your monthly budget, you may reach your financial goals a lot sooner. 

Your financial independence goals, your current financial situation, and your dedication to reach FI will determine how much you’re willing to change. 

Cutting expenses, getting rid of bad debt and increasing your savings a rate is a key part of becoming financially independent. Unfortunately, there’s no other way to reach financial independence. 

Your savings rate and investments are the driving force that will help you become financially independent. The more money that you’re able to push towards these areas, the faster you’ll reach your goal. 

If you don’t have money available to push towards your savings and investment accounts, you’ll need to start making extra money.

Increase your savings rate

Once you start doing a few calculations you’ll soon realize that saving 5% or 10% of your income won’t cut it. You’ll need to increase your savings rate to about 25% – 30% or more. 

Your savings rate will change depending on when you want to reach financial independence. 

Go through your monthly expenses and see where you can cut costs. This will help you increase your savings rate. 

Do you really need to live where you currently are? Do you really need the car you’re driving? Do you need a car at all? What are you spending on luxury items each month? What about takeaways, entertainment, or cell phone bills? 

Ask yourself these questions when you go through your monthly bank statements. 

If you don’t actually need any of these things, then why do you have them? 

If moving to a cheaper house or flat means saving a few thousand Rand each month, why don’t you move? 

Another way to increase your savings rate is to increase your income. 

There are two way to do this. 

  1. Ask for a raise 
  2. Start a side hustle

Start by asking for a raise, it’s a lot easier than starting a side hustle. 

If you want to reach financial independence sooner, you may want to start a side hustle. This will increase your income and savings rate at the same time. 

Check out our post How To Make Money From Home, in South Africa

Reach for the stars 

Now that you know how to become financially independent, it’s up to you to make that happen. 

Set your goals and reach for the stars. 

If you think that you can’t achieve financial independence for whatever reason, you’re wrong. The only things standing in your way is your current lifestyle and spending habits.  

It is important to remember that financial independence is a long game. Stay focused and patient on your financial independence journey. 

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