Economic freedom has often been confused with financial freedom, and the terms tend to be used interchangeably. This suggests that people do not understand the difference between the two, or the definition of either one. The two are closely linked because it is difficult to achieve financial freedom in a place where one has no economic freedom, but they remain distinct concepts.

In South Africa we have ‘economic freedom fighters’, the most notorious being one Julius Malema. Economic freedom, and the fight for it, is largely a politico-economic issue with more political than economic nuance. It concerns itself with issues such as trade, employment opportunities, property rights, empowerment, and other related issues.

Financial freedom on the other hand is less of a macro issue and tends to be more personal. It refers to the extent that an individual has reached a position where they have the financial means to live the life they have envisioned for themselves. Financial freedom is truly achieved where one’s financial position is also immune to or protected from adverse effects and unforeseen events.

Economic freedom has often been confused with financial freedom, and the terms tend to be used interchangeably. This suggests that people do not understand the difference between

In the South African context it can be argued that we have achieved a certain level of economic freedom. My business partner grew up in a Mafikeng township while I grew up in a Durban township. We were both able to get quality tertiary education, decent employment and job opportunities. We both reached that place where we felt we needed to start up something and make a difference. We were able to source the finance and get access to capital to make our business a reality. Many of our clients have walked similar paths, some facing greater obstacles along their way. This tells us that there is an element of economic freedom in South Africa sufficient to ensure that many are able to achieve financial freedom. We agree that more can be and should be done to achieve greater economic freedom, but we also believe that more people are in a position to achieve financial freedom than currently are.

How does one achieve financial freedom?

The road to financial freedom is littered with obstacles but is a lot easier to navigate than imagined. It starts with the simple discipline of the humble budget. A Barclays survey recently found that even the super rich budget. This is telling because it means that budgeting was a key part to them becoming rich in the first instance.

A second discipline to nurture is that of living within one’s means. A very real threat to financial freedom is keeping up with the Joneses. So what if your neighbour drives a BMW? Buy a BMW when you can comfortably afford one, not because your neighbour has one. Many people up their standard of living when their salary increases. A good strategy is to increase one’s standard of living after every three or four salary increases.

A third discipline is one of taking a longer term perspective when planning. A long term perspective favours education over entertainment. It favours skills development over chasing job titles. A long term perspective favours investing rather than saving. Putting money into the bank makes a banker and bank shareholders rich. Rather buy shares in the bank and wait for the returns to come, because they will with time.

A fourth discipline is to empower one with the knowledge to achieve financial freedom. Read George Clason’s The Richest Man in Babylon (Kalahari.com, R113). It was written in 1926 but remains relevant even to this day. Read the Millionaire Next Door (Takealot.com, R169) for a perspective on what a wealthy person really looks like and how they behave. Read the Effective Investor by Franco Bussetti (Takealot.com, R308) for a better understanding of South African investment markets. Read Finweek, the Financial Mail and the Business Day regularly enough that you are able to identify opportunities and act on them as a result of what you have read in the three books recommended here.

Finally, engage the services of a qualified financial adviser, and build a long-term relationship with him or her. Be sure that you are not dealing with a salesperson who is just interested in selling you some or other financial product. Ask yourself: has this person conducted analysis before they made a recommendation? Are they suitably qualified and experienced? How long have they been in practice or in industry? What is their investment philosophy? Is it written down somewhere? Are they a certified financial planner?

There is still a long way for South Africa to go before it reaches economic freedom. However, if more and more of its citizens are able to achieve financial freedom, the journey to economic freedom may end up being a lot shorter. Financial freedom in your lifetime is certainly a possibility, but it requires discipline and some guidance if you are to achieve sooner rather than later. Viva, financial freedom, Viva!