Financial Independence

You can achieve financial independence either by marrying money, inheriting money or making enough money. This article is concerned with the last point.

Yes it is possible to make enough money such that the income generated form your assets are enough to meet your expenses without having to work at all. Yes it can also be done early enough so that you can call it quits before hitting sixty. This can be achieved as early as your late 30s or early 40s. However, it will take planning, hard work, discipline and luck.

It is also absolutely ok to want to work till you hit 60 or drop or until your employer kicks you out. It is off course a lot easier to work until you drop if you own and run your business. As for me, I relish the freedom of knowing I am working because I want to not because I have to. I also relish the opportunity to do so many other things a full time job will not allow.

So how does one achieve financial independence? How do you acquire sufficient assets to that can generate enough income to cover your living expenses?

In my journey to financial independence, I have found the following very useful:

1. Learn to live below your monthly income as soon as you start earning. No matter how much you earn, if you don’t live below your income, you will end up in the poor house when you loose your job or retire. Therefore rule number 1 is live below your monthly income even if it is N10,000 ($60!). This discipline will serve you well when you start earning more. Keep aside 10-20% and increase as your income increase rather than increasing your expenses when you get a raise. Whether you have a monthly budget or not, the key is to keep aside the 10-20% every month.

2. From your monthly savings, put aside enough to cover 3 to 6 months living expenses so that you do not fall into financial abyss should you lose your job. Keep these funds in a savings account that you can access at any time.

3. Contribute to your employer’s retirement saving plan as required by law. However, if you are self employed or employed by a company with less than 5 employees, you will have to enroll voluntarily. Do so immediately as it forces you to save.

4. Start investing in the stock market once you have set up your emergency savings. You don’t need to have a lot to start investing. My first investment was in 1996 and it was 1,000 units of First Bank at N6 a share for a grand total of N6,000. These days, N50,000 is more than enough to get started.

We do not yet have Index funds in Nigeria and most mutual funds have been total disasters in the last decade. Therefore you have to invest in individual companies. Fortunately, it is not as daunting as it sounds as there are not more than 40 companies on the Nigeria Stock Exchange (NSE) worthy of your money.

Make sure you concentrate on buying good companies at fair valuations and select them from across several industries. that is diversify to manage risk.

Reinvest all dividends. Invest monthly, consistently through thick and thin.

Continue to educate yourself on the stock market and investing in general. Our market is still not as efficient as the markets in developed countries. This is good as it gives you the opportunity to exploit the inefficiencies for higher returns.

5. Take advantage of any opportunity to own your home. Whether it is through a loan by your employer, a cooperative or bank. For most people their single largest outgoing is house rent. It therefore makes sense to own your home outright to eliminate this large outgoing. And should you lose your job, the fact that you don’t have to worry about rent should be a relief.

If you take a mortgage, pay off as soon as possible as the high interest rate in our environment is too punitive and bad for long-term wealth accumulation.

6. Avoid taking debt to finance consumption. Ideally, your only debt should be your mortgage, which you should pay off fast.

7. Keep a record of all your assets and liabilities. It is useful to have a personal Balance Sheet at the end of each year. You can then review it against your plan. It not only tells where you are in your journey towards financial independence but also how well you are doing from year to year. I have my personal Balance Sheets dating back to 2004 and they are very revealing. More importantly without this record you wont be able to know whether you are making progress towards independence.

If you implement the above early in your career, you will be surprised how far you would have progressed over 15 to 20 years. This is because of the power of compounding. Starting early also ensures you have time to recover from mistakes. It also ensures you can be financially independent in your late 30s or early 40s even if you in a modest paying job.

To recap, the keys to financial independence are: live below your income, invest consistently, own your own home and avoid debt. I urge you to give it a go, there is nothing to lose except perhaps the shackles of the daily 9 to 5.


  1. This is enlightening, I wish I had read this like 5 years ago and started my balance sheet earlier. Thanks for the insight.

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