AS children, most of us were taught that in order to be successful and wealthy we need to go to school and get an education, and then get a good job and work hard. However, much has changed and in the real world, outside of academics, in order to achieve true financial freedom one must first possess financial literacy and be disciplined enough to use such knowledge to guide their decisions.

There are several persons who have gone the route of getting an education and working hard but still are not able to achieve financial freedom simply because they are financially unsophisticated; not meaning unintelligent, but simply not financially literate.

The amount of income you earn is not as important as the amount of money you keep, as money earned will be money gone too soon without the financial literacy and discipline to guide your monetary decisions.

The average person thinks in order to be rich all they need to do is make more money. However, what happens most times is that the more money they make — the more money they’ll end up spending frivolously; their expenses simultaneously increase with their income.

Earning a large sum of money will not guarantee you financial freedom if you are not able to preserve and grow a portion of these funds. If financial freedom is your goal, it is important to be versed in the art of making your money work for you and exercise full self-discipline in regards to money and spending.

In today’s economy you cannot save your way to financial freedom. One should not save for the sole purpose of saving, but rather with the intent of investing to achieve the outlined goal.

When you invest, there is a return on your capital; so your money is hard at work producing more money to add to your pocket. But when you put your money in a savings account, you may be getting an interest rate between one to two per cent; however, between the banking fees, inflation and depreciation (if investing in Jamaican dollars) you may not be getting any interest at all on your money; you may in fact be losing money in real terms.

Investing is the Holy Grail to financial freedom. Most persons have a misconception that investing requires huge capital and that only the rich can afford to make investments, hence the phrase “Only the rich get richer”. This misconception leaves persons trying to first attain a large sum of capital before they even begin to think about investing.

Contrary to this misconception, there are several investment options that do not require large capital and still offer good returns. Regardless of the amount of income you earn, a simple method you can use is to start small by saving between five and 10 per cent of your salary each month. In doing so, it is important to spend what is left after saving (as per a quip by Warren Buffett) and not the other way around. These funds should then be used for investment purposes only.

It is crucial for individuals to understand the difference between assets and liabilities. Simply put, assets are anything that is likely to put more money in your pocket than it takes out, and liabilities are anything that is more likely to take out more money than it puts in.

The rich tend to buy assets first and liabilities last. This is what makes and keeps them rich. They may also use liabilities such as debt to buy assets which grow faster than the cost of that debt (i.e. interest rate). This requires an immense amount of self-discipline as it is very tempting to buy into flashy liabilities and keep up appearances, but doing that will keep your finances in the red.

Liabilities do not usually add any value to your finances nor to your ultimate goal of financial prosperity. It is essential to keep this in mind at all times but especially when you are faced with temptations to spend frivolously. Debt should be moderate, manageable and not much when driven by consumerism. It is also important to avoid debt that does not pay you.

It is almost becoming a trend for people to take out loans to party and simply live a lavish lifestyle and buy things that make them seem rich. However, the financially sophisticated and disciplined will use debt solely to leverage investments and grow cash flows.

To achieve your goal of financial freedom: make money, use that money to make even more money and always repeat. Manage your money well so that it is always hard at work for you, as opposed to you slaving for it.

There are several investment opportunities to get return on your capital and now is always a good time to start. Speak with a licensed financial advisor who can offer you highly personalied investment advice. Master self-discipline and in the long term you won’t need to struggle to keep up because your finances will allow you to stay “UP”!

Renee Barnett is an advisor associate at Stocks & Securities Ltd