“Money is a terrible master but an excellent servant.” –P.T. Barnum
My journey to reaching financial independence in Africa, really started at the beginning of this year as this is when I started paying myself first, trimming unnecessary expenditures and investing for the long term. Its also a journey of learning about myself, the global economic machine and personal finance. I may work in finance but there is still so much for me to learn and I really need to practice what I preach – how can I manage other peoples money if I cannot even manage mine?
My primary goal is to grow my passive income or dividend income to being about equal to my salary right now. Passive income goes right to your bank account and you don’t have to do anything at all so you can literally retire. This is unlike rental income for example – yes it does not have much work but you still have to be on top of the situation – making sure the tenants are paying, address their complaints and issues and so on.
However, growing this level of passive income will take a very long time of consistent saving anywhere from ten to fifty years! Hopefully my investment skills will make this closer to ten years than fifty years. When planning, I think its always important to be realistic and plan for the worst and not assume perfect conditions, the economy might not do well, markets could fall etc. So I have to start thinking about other ways of increasing my income and improving my financial situation. This year the only additional income stream that I was able to achieve is the dividends and now I want to really work hard at starting a business as well.
One thing that has changed in my thinking about equity investments recently is that I don’t think a strictly buy and hold is the right strategy because the volatility in African markets can be quite high – so no matter how much I like a company, if it reaches my price target I will sell and buy back when the price corrects, this is much harder than it sounds.
Financial independence if obviously a very long term goal for me – but in the short term my financial goals (in no particular order) are:
- Pay off my credit card debt in full (Dec 2017)
- Own 50,000 shares in at least one stock that I own (June 2016)
- Buy land and get that title deed (October 2016)
- Make the first sale in my new business (July 2016)
- Have a foreign currency fixed deposit account (December 2016)
- Have an emergency savings fund equal to a year of expenses (December 2018)
The target dates are really just guesses but by the time that I achieve these six goals, I will be moderately financially independent but not yet near that target of financial independence from passive income.