The real meaning of financial freedom

Hi Waceke,

I read your column regularly and I would like an honest answer about entrepreneurship. Can you really be financially free as an entrepreneur? Some of my friends have gone into business and they are really struggling. They cannot even afford lunch the way they used to. This really scares me because the ones who have made it are much fewer than the ones who are still hustling. Please advise me. 

Betty

A lot of people go into business because they hope it will translate into financial freedom. The converse is also true; there are people who shun business because they see it as an obstacle to financial freedom. The first lot of people are propelled forward by the financial potential and possibilities that business provides, while the second lot are held back by the potential financial challenges they would face if they started a business.

There is no doubt about it, every entrepreneur will at some point face financial challenges. However, there are entrepreneurs who seem to have achieved financial freedom. Nevertheless, Betty’s concerns are valid. When most people think about financial freedom, they relate it with having a lot of money in the bank and a luxurious lifestyle. However, as I and many other entrepreneurs have learnt, that is the end result of a process. Financial freedom starts way before that. It begins with your mindset and your relationship with money.

To understand this better, imagine you have only Sh200 to your name. You left a nice job with a regular income to go into business. You bought into the pros of starting a business hook, line and sinker. Then one day you rock up to the ATM and find that you only have Sh200. What will you do? In moments like this, some people contemplate suicide.

I had such a moment once; I did not contemplate suicide, but I did try to bargain with God to whisk me away to heaven. The good thing is that you eventually get away from the suicidal thoughts and start figuring it all out. You begin to realise that money does not define you. You may have only 200 bob, but you also have a brain that can think, you have an idea that you can take the first step on. In that moment of desperation, you discover that you have abilities that were dormant.

ATTRACTED TO VISION

This is mental financial freedom. When money is no longer your identity; when you don’t rely on money to give you a sense of personal worthiness. You don’t feel and act inferior because of the size of your wallet. You don’t really care that you can’t go out for lunch and you have no problem admitting that you can’t afford it. On the flip side, you also don’t act superior when your wallet fattens.

Too many of us have our identities mixed up with the amount of money we have or don’t have and it limits us. Entrepreneurship has a way of straightening things out; when you go through the peaks and valleys of business, you cannot afford to have different personalities for each stage.

Many entrepreneurs who have stuck it out will tell you they don’t do what they do for money. I’m not saying paying bills is unimportant, but there’s got to be more than money to keep you from jumping off a cliff during the challenging times. That’s another extremely liberating aspect. You have an ability to dream, and to have a dream that’s bigger or more important to you than money.

Many investors are attracted to people because of the vision they have, not just the financial targets they set. Entrepreneurs never know how that vision will be achieved and/or how to get the money to achieve that vision, but they dream anyway and take the first step. Your business should not simply be a money-making tool for your current lifestyle; if it is, it will always be limited to your lifestyle.

So if you remove money from the equation, why else do you want to run a business?  Is there some form of impact you want to have? Do you want to have more control over your time? Is it a legacy you want to leave? No one can define it for you, but financial freedom comes from understanding that money cannot be the objective for everything.

As an entrepreneur you will have to sometimes look at the bigger picture and forsake short-term financial comfort. As a startup trying to build your profile, you will give up the huge profit margins. You may be paying everybody else but yourself at some point. You may have to discount a service heavily for the longer-term opportunities that partnership will present. You cannot be blinded by money.

Lastly, let me tackle the tangible financial freedom that we all want and that is a favourite topic in our entrepreneurship programme – money in the bank. 

RIGHT BALANCE

Betty, it is possible for an entrepreneur to have lots of money in the bank and it is not for the chosen few. We all want that.

When you have the right balance with money and a vision stronger than just yourself, you tend to persevere through the challenges and put in the right resources to support that vision. This will mean that eventually you create structures in this business that will make it run even without you being there.

To put this in money terms, it means that you can go on holiday for three months and the business can make money and pay you without you being actively there to run it. Your kids will still go to school and rent will still be paid. However, it is not just about having a lump sum of money in the bank. It is being able to have that money sustainably.

A guaranteed Sh100, 000 per month is way better than a one-off lump sum of one million which you are not sure you will get again. It is important to progressively put in these structures even from an early stage.

If the business will always need you to run, you can forget about financial freedom. Entrepreneurship is definitely one of the key ways to become financially free but be prepared to have your attitude and relationship with money tested before it translates into money that you can spend.