There seems to be a misconception that being financially free is the ability to pay your monthly commitments and loans. Well…not really. Though you may be able to pay for your house or property mortgage, car loans, investments (if any), utilities, food, other commitments, you are not really financially free. You are actually cash flow debt free.

To be financially free is to be completely debt free. If you have property loans, motor vehicle loans, credit card debt outstanding; work at settling them soonest possible.

Your income as an employee, regardless of how high up the rank or ladder you are at, is never guaranteed. Incomes of businessowners are never guaranteed, too. Outstanding debts remain…guaranteed. Repayments are expected as scheduled.

The “trick” is how to manage or balance your income vs expenses. Not too long ago, you would hear the phrase, “How to balance your cheque book, or for the Americans, checking account“.

One of the biggest headaches we have is what to spend money on. Spend with money we don’t have.

Wait a minute. Spend money we don’t have? “How is that possible?” , you may ask. There are many different types of credit made available to us everyday. Often enough, we did not apply for this credit but it is already preapproved. So, why not take it?

Taking pre-approved loans poses several problems. One is, since we had no intention of applying for a loan, we did not have a need for it. Here lies the problem. Now that we have the loan, we have to look for something to spend on. So, what the financial corporation that lent you the loan has done is: pass the buck. It had cash that it needs to make money from. It lends you the money and earns an interest from it. You now, have to figure what to do with the money.

You may most likely end up spending the funds on unnecessary things. You may beautify your home with home renovations. Or go on that expensive holiday just to take some pictures and post on social media: “I was here”. Note that spending on these activities in itself is not wrong. However, if you did not plan for it…

Here lies the danger…. you may get offers from various financial lending institutions, all at the same or around the same time. The enticement is that these loans are easy money. You may be approved for several of them at the same time.

You are now attracted to get that super luxurious vehicle or travel business or first class on a holiday. You may also get attracted to investing in various investments. All these you would not have done otherwise, based on your income and living standards.

Another point which can be considered as the most important point, is that you have to pay back the loan with interest. It would be good that you work out your income less 10% savings for future, all your existing commitments, living expenses and just-in-case expenses to see if you have any money balance to pay for the monthly repayment over the duration of the loan/s.

A good safety net to have is that you have cash the equivalent of the loan on standby in the event if the loan has to be cashed in earlier than the stipulated period. This could set you in the “financially free” category.

You are going to ask, “Why do you then need a loan if you have the cash?” This is a topic that can be discussed in a future article.

Who is financially rich and free: The man who lives in an expensive part of town, has several flashy vehicles, wears branded clothes, patronizes expensive restaurants and has to worry about payments? Or, the man who lives in an medium to up-market part of town with a small mortgage balance or none, drives around in a 10 year old, fully paid for vehicle, not flashy in branded clothes and patronizes fine dine restaurants that serve great food, not necessarily too expensive, and can smile, laugh and sleep easy at night without having to worry about finances?


The purpose of this article is to help readers come to a realization that if the world does go into a recession this year as predicted in news and reports from all the media over the last year or so has informed us; that we, be prepared and are able to weather this period of uncertainty. Put your views and comments in the comment section for discussion.

There is a misconception that being financially free is the ability to pay your monthly loans and commitments.