Financial Freedom - Sometimes it's NOT about the numbers
I’m not making the argument that financial freedom is all in your head and made up of rainbows and unicorns. However, it's undeniable that financial freedom is as much about the numbers as it is about how you feel about the money and investments you've accumulated. As a CFP and as someone who has been trying to balance the numbers and the feelings personally for quite some time, I wanted to share a few key points I've noticed with clients, prospective clients, and myself about how to be and feel "FINANCIALLY FREE."
Currently, just 1 in 10 Americans would classify themselves as financially free. But what does financially free even mean? Respondents to a survey identified these factors, but my argument is that it's subjective and what it means to be financially free to one person is different from another. Factors may include age, generation, family situation, and others, like how you grew up.
Being debt-free: 54.2%
Living comfortably, if not rich: 50%
Being able to meet monthly financial obligations with money left over: 49.3%
Never having to worry about money: 46.2%
Just under 32% said having sufficient funds to give up working all together was their economic dream.
Just 12.6% of respondents believe that being rich constitutes financial freedom.
My definition of "Financial Freedom"? When you get to the place where you can make decisions about what will make you and your family happy, and money is not the primary factor in the decision.
3 Things you can do to work towards being Financially FREE:
Plan it - What steps do you need to take financially to put yourself in a position to make decisions about work, family, education, etc., without money being the #1 concern?
Do it - Having done all the hard work, what’s stopping you from pulling the trigger? You’ve saved 100K to redo your kitchen? Set goals to help you put your plans into action.
Choose it - Sometimes our minds can be a dark and mysterious place, and we need to remind ourselves that choosing to spend the money or make a decision that you’ve long prepared for IS THE PLAN, and you shouldn’t feel guilty for choosing it. You haven’t acted impulsively; even if the choice wasn’t long planned, you planned for the freedom to make this decision. Allow yourself to feel peace.
The most basic example of this? Prospective clients come to me every day and tell me, "I WANT TO RETIRE EARLY." Client A wants to retire this year instead of going until 67 to collect their full social security. Having done careful planning with their advisor, they made sure they’d be "work optional" by 60, so if you’re 62, then you know you can go ahead and pull the trigger. Will you have more if you wait? Yes, but more money isn’t always going to be the deciding factor. It’s a whole different story if you want to retire at 62 but know that you’ll have to cut out all hobbies and vacations just to make it happen. That’s NOT financial freedom.
Another example might be planning for the things that make you happy on an ongoing basis. Personally, I love to travel, but travel is expensive with a family of 5. I had the experience of feeling equal amounts of stress around how much it costs to go on a big international trip and having to say no to trips I really wanted to take because I didn’t already have the funds set aside. The one that stuck out in my head was being invited to go to South Africa and speak at a women's conference and having to say no because I didn’t have the funds lined up. I actually cried and realized that I needed to realign my money to give myself more freedom to do the things that would make me happy and fulfilled. Since then, we have completely revamped our budget and have a large travel sinking fund so that when an opportunity presents itself, we can pull from already allocated funds, guilt-free. Why is it guilt-free? 1. We’ve made the decision not to carry any debt. 2. We know we’re saving exactly what we need to get to our own "work optional date." And 3. Most essential for me and my guilt-ridden personality is because I CHOOSE to feel that way. When guilt starts to creep in, I remind myself, these are hard-earned funds. We made the sacrifices on the front end, and I’m going to choose to spend these funds GUILT-FREE.
Moral of the story here? We’re all different, what we want out of life is different and what makes us feel happy and secure are different. It’s important to slow down and take a moment to understand what those deep rooted factors are for you and your family and start planning your financial journey around creating financial freedom.
Sources:
https://www.investopedia.com/just-one-tenth-of-americans-believe-they-have-financial-freedom-study-finds-7814103