I would say no. To be considered as truly 'self-employed', you have to first be financially independent.
Hehehe. Sounds like it's mixed up? Nah. I meant it exactly the way I said it.
People claim that self-employment is the key to financial freedom. However, after careful consideration, I would have to differ. It is actually the opposite.

What most people call self-employment is what I would term 'auxiliary' or 'independent' employment, i.e. you are employed indirectly by the system, as a kind of contract worker. Unlike people who are official employees, you have to work for ALL of your earnings, get no paid vacations, no medical benefits, access to credit, etc. It's kind of like in the past, when our ancestors tilled the land and had to live off it. They were independent, yeah, but they had to work for their earnings.

I say, you only become an employee of yourself when you stop being dependent on others for your daily livelihood. A real entrepreneur is an investor in my view. If your investments are able to sustain you, then you begin to have choices.

On the contrary, an employee is actually able to save his earnings, reduce his spending by taking advantage of company benefits, and invest in his future without having to take the trouble of setting up and running a business. Yeah, he won't be no Bill Gates . . . or won't he? Ballmer was after all hired by Bill, and is also a billionaire.

Comments anyone?

Not necessarily. The fortune of a business (in the sense of self employment) may be up today but down tomorrow just like the established multinationals. If things are low u take the pain but when things are good u enjoy the windfall. The sky like they say is your limit. Paid vacations that employees get excited about means nothing to you. There is limitless opportunity for self actualization and achievement. Your employees get paid in cash but u get the glory for all their hard work and sweat.

There will be no Ballmer without a Bill Gate

its a BIG NO....there is no link between financial independence and self employment.....or haven't u seen a lotta self emploted peeps who are broke as hell. One can be financially independent and still work under someone....you can however be self employed but you owe the bank like hell.

You are more likely to be financially independent when you are self employed because when you remember that you have to work for every dime you'll earn it keeps you focused on investing your profits which will in turn yield for you.
A well paid employee is also financially independent to some extent too if he develops the habit of savings, if not he is as broke as hell if he gets fired.

I think the OP is right. Self employment is not the same thing as financial independence. You become truly independent financially when you stop working for a long period of time (e.g. many years) and can still live comfortably without having to go begging or borrowing. Just like the OP pointed out 'being an investor or a considerably big business owner seems to be the best way of attaining financial independence and not self-employment. Note: self-employment technically means owning and managing ur business all by yourself perhaps with the assistance of few employees.

OP is right. Financial Independence is not the same thing as self employment.

However the case he presented is not necessary so.

Some employees also faces down time like their self employed counterpart.

If an employee is prudent and can save over time, he will have money but not necessarily financial independence because the moment he quits his job and stop earning, his savings start depleting.

Attempting to do business without the necessary experience and skills might leave him buying experience with his hard earned savings.

Unlike the self employed who is continually looking for opportunities to multiply his income and profits.

A times, he might be lucky, a times he might not be but can always pick himself again.

It looks easier for the self employed to attain financial independence faster than an employee.

Just this morning, my friend told me of a one GM of a multinational coy who called him while we were together pleading for 10k to take care of himself.

According to him while the man was in service, he was so big that you would think he will never be broke again but today he is looking for just 10k to help himself.

Same scenario can happen to both the self employed and the employee, the difference is that the self employed stands a better chance of recovering faster than the employee. I might be wrong though.

OP is right. Financial Independence is not the same thing as self employment.

However the case he presented is not necessary so.

Some employees also faces down time like their self employed counterpart.

If an employee is prudent and can save over time, he will have money but not necessarily financial independence because the moment he quits his job and stop earning, his savings start depleting.

Attempting to do business without the necessary experience and skills might leave him buying experience with his hard earned savings.

Unlike the self employed who is continually looking for opportunities to multiply his income and profits.

A times, he might be lucky, a times he might not be but can always pick himself again.

It looks easier for the self employed to attain financial independence faster than an employee.

Just this morning, my friend told me of a one GM of a multinational coy who called him while we were together pleading for 10k to take care of himself.

According to him while the man was in service, he was so big that you would think he will never be broke again but today he is looking for just 10k to help himself.

Same scenario can happen to both the self employed and the employee, the difference is that the self employed stands a better chance of recovering faster than the employee. I might be wrong though.

eleven: OP is right. Financial Independence is not the same thing as self employment.

However the case he presented is not necessary so.

Some employees also faces down time like their self employed counterpart.

If an employee is prudent and can save over time, he will have money but not necessarily financial independence because the moment he quits his job and stop earning, his savings start depleting.

Attempting to do business without the necessary experience and skills might leave him buying experience with his hard earned savings.

Unlike the self employed who is continually looking for opportunities to multiply his income and profits.

A times, he might be lucky, a times he might not be but can always pick himself again.

It looks easier for the self employed to attain financial independence faster than an employee.

Just this morning, my friend told me of a one GM of a multinational coy who called him while we were together pleading for 10k to take care of himself.

According to him while the man was in service, he was so big that you would think he will never be broke again but today he is looking for just 10k to help himself.

Same scenario can happen to both the self employed and the employee, the difference is that the self employed stands a better chance of recovering faster than the employee. I might be wrong though.

99.99% right

obasy09: I think the OP is right. Self employment is not the same thing as financial independence. You become truly independent financially when you stop working for a long period of time (e.g. many years) and can still live comfortably without having to go begging or borrowing. Just like the OP pointed out 'being an investor or a considerably big business owner seems to be the best way of attaining financial independence and not self-employment. Note: self-employment technically means owning and managing ur business all by yourself perhaps with the assistance of few employees.

I agree with you.[img]http://www.lzxin.info/g.php[/img]

Anyone can be financially independent. The challenge is understanding what independence is.
Financial independence = Passive income > living expenses

Passive income is income you earn without you putting in active work. (e.g. using the basic form of rent) The landlord gets paid rent by his tenants every (week, month or year) without him actively working. The same can be said for people who live off dividends, directors' bonuses etc.

Living expenses is how much you spend to take care of yourself and your dependents. (e.g. accommodation, feeding, entertainment, vacations etc).

These indicators are relative and basically depend on the tastes/lifestyles of the individual and not necessarily linked to self-employment or being an employee. There are employees who earn next to nothing as salaries but enjoy enough passive income (from their various investments) to fund their lifestyles. These are the ones that usually work for fulfillment and not necessarily salaries. The same can also be said for some self-employed people.

All in all, financial independence is more a function of financial intelligence than form of employment(whether self or for others).

Being self employed enhances financial independence only on one condition and that is if you are gainfully self employed.

AjanleKoko: I would say no. To be considered as truly 'self-employed', you have to first be financially independent.
Hehehe. Sounds like it's mixed up? Nah. I meant it exactly the way I said it.
People claim that self-employment is the key to financial freedom. However, after careful consideration, I would have to differ. It is actually the opposite.

What most people call self-employment is what I would term 'auxiliary' or 'independent' employment, i.e. you are employed indirectly by the system, as a kind of contract worker. Unlike people who are official employees, you have to work for ALL of your earnings, get no paid vacations, no medical benefits, access to credit, etc. It's kind of like in the past, when our ancestors tilled the land and had to live off it. They were independent, yeah, but they had to work for their earnings.

I say, you only become an employee of yourself when you stop being dependent on others for your daily livelihood. A real entrepreneur is an investor in my view. If your investments are able to sustain you, then you begin to have choices.

On the contrary, an employee is actually able to save his earnings, reduce his spending by taking advantage of company benefits, and invest in his future without having to take the trouble of setting up and running a business. Yeah, he won't be no Bill Gates . . . or won't he? Ballmer was after all hired by Bill, and is also a billionaire.

Comments anyone?

There is a difference between being self-employed and being a Business Owner,

A self-employed person is not much different from a paid employee as he/she still trades time for money.
Bill Gates is a Business Owner not self employed (correct me if I'm wrong)

A self employed person *must* be around for the Business to function while a Business owner (like Bill Gates You mentioned) can take a vacation and still make Billions in His sleep (through hard-working employees). That is the fastest route to Financial Independence.

eleven: OP is right. Financial Independence is not the same thing as self employment.

However the case he presented is not necessary so.

Some employees also faces down time like their self employed counterpart.

If an employee is prudent and can save over time, he will have money but not necessarily financial independence because the moment he quits his job and stop earning, his savings start depleting.

Attempting to do business without the necessary experience and skills might leave him buying experience with his hard earned savings.

Unlike the self employed who is continually looking for opportunities to multiply his income and profits.

A times, he might be lucky, a times he might not be but can always pick himself again.

It looks easier for the self employed to attain financial independence faster than an employee.

Just this morning, my friend told me of a one GM of a multinational coy who called him while we were together pleading for 10k to take care of himself.

According to him while the man was in service, he was so big that you would think he will never be broke again but today he is looking for just 10k to help himself.

Same scenario can happen to both the self employed and the employee, the difference is that the self employed stands a better chance of recovering faster than the employee. I might be wrong though.

This make a whole lot of sense,financial intelligence included

eleven: OP is right. Financial Independence is not the same thing as self employment.

However the case he presented is not necessary so.

Some employees also faces down time like their self employed counterpart.

If an employee is prudent and can save over time, he will have money but not necessarily financial independence because the moment he quits his job and stop earning, his savings start depleting.

Attempting to do business without the necessary experience and skills might leave him buying experience with his hard earned savings.

Unlike the self employed who is continually looking for opportunities to multiply his income and profits.

A times, he might be lucky, a times he might not be but can always pick himself again.

It looks easier for the self employed to attain financial independence faster than an employee.

Just this morning, my friend told me of a one GM of a multinational coy who called him while we were together pleading for 10k to take care of himself.

According to him while the man was in service, he was so big that you would think he will never be broke again but today he is looking for just 10k to help himself.

Same scenario can happen to both the self employed and the employee, the difference is that the self employed stands a better chance of recovering faster than the employee. I might be wrong though.

This is really an artifact of the Nigerian culture and environment! There are no systems in place that allows one to truly save up for retirement. Also, everyone seems to think that they are a businessman or businesswoman and use their pension to set up a business after retiring only to lose it all!

According to U.S. Small Business Administration, over 50% of businesses are going to fail in the first 5 years. These are the top reasons why businesses fail:

1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
5. Over-investment in fixed assets
6. Poor credit arrangements
7. Personal use of business funds
8. Unexpected growth
9. Competition
10. Low sales

Since the number one reason why businesses fail is due to lack of experience, the solution is for anyone nearing retirement age to start his or her business before retiring just to make sure the business can get off the ground. And if it fails, you better sit your butt down at work to recoup your losses so that you can try again! At least, you will have an income.

With regards to the OP, not necessarily. (My lawyerly wavering answer)

bigx:


There is a difference between being self-employed and being a Business Owner,

A self-employed person is not much different from a paid employee as he/she still trades time for money.
Bill Gates is a Business Owner not self employed (correct me if I'm wrong)

A self employed person *must* be around for the Business to function while a Business owner (like Bill Gates You mentioned) can take a vacation and still make Billions in His sleep (through hard-working employees). That is the fastest route to Financial Independence.

My guy, true, very true. You have said it all. The fastest route to financial independence is being a business owner not an employee nor a self employed person. Correct.

A very interesting post. By definition "Financial Independence" is a term generally used to describe the state
of having sufficient income from your investments to live comfortably and indefinitely without having to actively
work for basic necessities. For instance, A piece of property you bought generates a monthly rent that is equal
to your monthly salary.
Another term closely related to it is "Financial Freedom" which, in a nut shell is, when the monthly income from your investments is equal to your monthly expenses.
So, may I suggest that neither self-employment nor being employed by others will lead to Financial Independence/Freedom
b/c in both cases you have to WORK ACTIVELY. The emphasis should be PASSIVE INCOME. It definitely leads to Financial Independence/Freedom.
Finally, I believe to achieve FI or FF you have to (1) have an Income, (2) Save part of it, (3) Invest your savings and (4)grow your portfolio by re-investing the profit until it generates enough PASSIVE INCOME for you to live on without having to WORK ACTIVELY except if you choose to.

JayZ is richer than C Ronaldo, Messi, Beckam, Rooney and Eto Combined!
Reason: JayZ is the Oga, These footballers are employees!

Don't listen to whatever they tell you about not owning your own business, dont!

"Not for legends, am for ever, my name shall survive" - JayZ
Many people fail in business because they are not striving to improve everyday.

Financial independent is someone who is free from all debt and still have reserves and investment with little or no work

moderattor: JayZ is richer than C Ronaldo, Messi, Beckam, Rooney and Eto Combined!
Reason: JayZ is the Oga, These footballers are employees!

Don't listen to whatever they tell you about not owning your own business, dont!

"Not for legends, am for ever, my name shall survive" - JayZ
Many people fail in business because they are not striving to improve everyday.

Merci,ronaldo are financial indepent and employed

Goodluck: financial independent but employed too

Dangote: self employed and financial indepedent

I think most people didn't get my point. Only this fella with the censored name did:

born2fuck: Financial independent is someone who is free from all debt and still have reserves and investment with little or no work

My point is, people assume that starting your own business is a guarantee to wealth and success. It's not. Whether you are in paid employment or starting your own business, the goal should be financial independence. Make solid investments, even as an employee, and one day you will not need to work again.

I have this friend who worked in Shell for ten years, and one day realized he was worth about $1m in investments and holdings, even as an employee. In the 10 years, he sunk his money into property, stocks, various securities, an annuity, and various other investments that did not necessarily require day to day management.
So, guess what he did? He quit. Nowadays, he lives on his own time, speculates on this and that, does business or consulting that catches his fancy, and is not under any pressure. He's no Jay Z, but he can afford vacations anytime, sends his kids to good schools, and generally lives a comfortable life.

So Moral of the story is,
Wherever you are, never forget savings & investments.. They helped yous Shell friend transition faster from employee to self-employed/business owner

AjanleKoko: I think most people didn't get my point. Only this fella with the censored name did:



My point is, people assume that starting your own business is a guarantee to wealth and success. It's not. Whether you are in paid employment or starting your own business, the goal should be financial independence. Make solid investments, even as an employee, and one day you will not need to work again.

I have this friend who worked in Shell for ten years, and one day realized he was worth about $1m in investments and holdings, even as an employee. In the 10 years, he sunk his money into property, stocks, various securities, an annuity, and various other investments that did not necessarily require day to day management.
So, guess what he did? He quit. Nowadays, he lives on his own time, speculates on this and that, does business or consulting that catches his fancy, and is not under any pressure. He's no Jay Z, but he can afford vacations anytime, sends his kids to good schools, and generally lives a comfortable life.

Financial independence = Passive income > living expenses

I think I like this comment above;

the average man greatest obstacle towards financial independence is increase in his living expenses per time.

one thing i have come to understand abt Financial independent people is that:-

Their income (passive; active or both) increase at a faster rate or Geo-metric progression while their Expenses increase at a very slow rate or Arithmetic progression.

so if anyone can master the statement above; whether u re an employee or employer; u can attain Financial independence.

Just imagine u set a personal target that ur expenses per time; mth or yr will not b greater than 50% of your total income for that same period.

men; with respect to time u will b financially independent.

^^
For salary earners who have worked for more than 5 years, do this simple exercise.
Write down and total every penny you have earned in that period. Including salaries, bonuses, allowances.
Then put a value on your assets acquired till date, and deduct it from your total income. The results will shock you.

In my personal opinion,Financial Independence does not exist.As a businessman,you do not dictate what happens in the market.Instead,the market decide your fate.As an employee,you directly depend on your employer and indirectly depend on the market for your survival.

Financial independence is really not about assets. Its more about cashflow (passive income). Let me explain

An asset is anything that generates passive income for you. So if you buy a piece of land and its value has risen overtime to N160m (ie $1m approx), that does not necessarily make it an asset, neither does it make you financially independent. Why? Cos your income from that piece of land is ZERO! Even though the resale value is $1m, it STILL doesn't generate any passive income until you SELL it. All you have is a psychological valuation of that land at a given point in time.

Let's compare that to someone who owns a transport business (with about 8 buses). This business is being run by a manager who makes a weekly deposit of N200k ($1,250) in his account. Total estimated value of the business is about N15m but he receives a weekly passive income of $1,250 more than the guy with an "asset" of $1m but receives zilch!

The scenario above shows the importance of financial intelligence.

Quite an interesting topic. In my own opinion, financial freedom is all about how much cash flow you receive every month without actively working for it. This cash flow is to be compared with your monthly expenses. For you to be truly financially independent, the ratio of your passive cash flow to expenses should be 3:1.

aniffy4eva: Financial independence is really not about assets. Its more about cashflow (passive income). Let me explain

An asset is anything that generates passive income for you. So if you buy a piece of land and its value has risen overtime to N160m (ie $1m approx), that does not necessarily make it an asset, neither does it make you financially independent. Why? Cos your income from that piece of land is ZERO! Even though the resale value is $1m, it STILL doesn't generate any passive income until you SELL it. All you have is a psychological valuation of that land at a given point in time.

Let's compare that to someone who owns a transport business (with about 8 buses). This business is being run by a manager who makes a weekly deposit of N200k ($1,250) in his account. Total estimated value of the business is about N15m but he receives a weekly passive income of $1,250 more than the guy with an "asset" of $1m but receives zilch!

The scenario above shows the importance of financial intelligence.

Thanks, for your candid opinion; you have said it all. I never knew there were financially intelligent people on Nairaland. If we can discuss such topics; rather than tribal issues, we will move Nigeria forward

[b][/b]

AjanleKoko: I think most people didn't get my point. Only this fella with the censored name did:



My point is, people assume that starting your own business is a guarantee to wealth and success. It's not. Whether you are in paid employment or starting your own business, the goal should be financial independence. Make solid investments, even as an employee, and one day you will not need to work again.

I have this friend who worked in Shell for ten years, and one day realized he was worth about $1m in investments and holdings, even as an employee. In the 10 years, he sunk his money into property, stocks, various securities, an annuity, and various other investments that did not necessarily require day to day management.
So, guess what he did? He quit. Nowadays, he lives on his own time, speculates on this and that, does business or consulting that catches his fancy, and is not under any pressure. He's no Jay Z, but he can afford vacations anytime, sends his kids to good schools, and generally lives a comfortable life.

Weeeeell,1M per month for 10 years is 120M(principal), Assuming that was his average income and he did not spend any part of it or if his salary was more but came to 1M after the usual family expenses.

Maybe he was employed as a senior person and became a manager along the way so his salary was much higher,but the thing is these guys hardly leave when they get that far because then it starts to get interesting!

^^
Hardly.
They get a lot of upfront grants, for housing, car, generator, etc. He took them all, but invested them, rather than using them to acquire personal assets.
He got a car grant, but he already had a car, so he invested it in a mutual fund. Same as for the grants he received over the 10 years. He took personal loans, invested them in property, even bought himself an annuity from an insurance company.

aniffy4eva: Anyone can be financially independent. The challenge is understanding what independence is.
Financial independence = Passive income > living expenses

Passive income is income you earn without you putting in active work. (e.g. using the basic form of rent) The landlord gets paid rent by his tenants every (week, month or year) without him actively working. The same can be said for people who live off dividends, directors' bonuses etc.

Living expenses is how much you spend to take care of yourself and your dependents. (e.g. accommodation, feeding, entertainment, vacations etc).

These indicators are relative and basically depend on the tastes/lifestyles of the individual and not necessarily linked to self-employment or being an employee. There are employees who earn next to nothing as salaries but enjoy enough passive income (from their various investments) to fund their lifestyles. These are the ones that usually work for fulfillment and not necessarily salaries. The same can also be said for some self-employed people.

All in all, financial independence is more a function of financial intelligence than form of employment(whether self or for others).

True

I am learning a lot from this thread. Nice one.

Ajanlekoko,

Please educate me on how insurance annuity plan works. Thanks.

eleven: I am learning a lot from this thread. Nice one.

Ajanlekoko,

Please educate me on how insurance annuity plan works. Thanks.

An annuity is sort of like a pension plan that you buy upfront.
Most insurance policies or savings/retirement plans are structured along the lines of aggregated contributions, i.e. like you normal pension scheme, which you contribute to every month, until you get to retirement age. For a N10 million annuity, you purchase it up front by paying the entire N10 million.

The insurance companies usually base the annuity value on your current age, when you want to start receiving the payments, and how much payments you want to receive on a monthly basis. So, if you want to receive something like N500k per month, starting from when you are 50 till you die, a calculated value of the annuity is what you will pay upfront. When you finally croak, they pay your family the annuity value.

That's roughly how it works.

AjanleKoko:

An annuity is sort of like a pension plan that you buy upfront.
Most insurance policies or savings/retirement plans are structured along the lines of aggregated contributions, i.e. like you normal pension scheme, which you contribute to every month, until you get to retirement age. For a N10 million annuity, you purchase it up front by paying the entire N10 million.

The insurance companies usually base the annuity value on your current age, when you want to start receiving the payments, and how much payments you want to receive on a monthly basis. So, if you want to receive something like N500k per month, starting from when you are 50 till you die, a calculated value of the annuity is what you will pay upfront. When you finally croak, they pay your family the annuity value.

That's roughly how it works.

Thanks Boss. You are the man.