A good financial objective for working people is to replace your monthly salary with income from other sources. For instance, if you earn a net salary of UGX 2.0m, the objective would be to earn an additional UGX 2.0m from sources outside work.
Doing this reduces your dependency on a job for economic survival. When you achieve this, you begin to look for work that fulfills you. You no longer have to stay in a toxic or uninspiring workplace.
To achieve such a goal, you need a good strategy. There are primarily three strategies I would recommend. The first is to offer your unique services to other customers other than your employer. Of course, you must make sure you are not breaching company policies. For instance, if you are an accountant, offer fractional accounting services to small businesses over the weekends. This way, you build another stream of income outside your formal job.
The second strategy is to invest in passive income streams like unit trusts and bonds. For instance, using our example, if you manage to save and invest UGX 1m per month in bonds yielding about 15%, it would take you about 9 years to start generating enough passive income to replace your current salary of UGX 2m. At the end of 9 years, you will have about ugx 200m (see compounding table below). This strategy is slow and requires a lot of discipline and dedication, but it is worth it.
The final strategy is to start a business outside your profession. This business should be built around your passions and interests and should have profit potential. This path is the most risky because most businesses collapse in a short while. Consider projects like farming, trading, land flipping, e-commerce, retail and wholesale, cottage manufacturing, services, etc. Do thorough due diligence and market research before venturing out.
The idea is to choose the strategy that best aligns with your circumstances. If you have an entrepreneurial bent, consider starting a business. If you don’t like the hassle of business, stick with the bond strategy. If you are a professional, consider providing your professional services combined with the bond strategy.
In all cases, it helps to maximize the money you are earning in your current job. Consider upgrading your skills and education so you can get promoted faster. Also, try and move into managerial roles and other roles where a part of your compensation is based on performance. For instance, sales jobs are paid on performance. If you sell more, you earn more. Also, try and get a better employer within or outside your company. A good employer can really accelerate your earning potential. Finally, deliver as much value as you can on the job so you increase your earnings. Any extra cash you make on the job should go towards accelerating whatever strategy you have chosen.
Over time you will eventually manage to replace your salary. This is your point of financial independence and you now have a choice of whether to stay on the job or leave to pursue your other ventures. In case you stay on the job, you will experience a renewed sense of freedom at work. You will do your work because you enjoy it and are making a difference rather than going to work to pay the bills. This is a much better way to work!
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