What is financial freedom and how would it look to you?
This is a personal question. Many clients want to become debt free, have savings, investments or pension sums and certain insurance, to feel ‘financially free’.
For me, it was knowing I have money in the bank so if work ever became too stressful and I wanted to step back (or away), I have enough money to not put any stress on myself and my hubby.
A little personal side note –
During my 20s and 30s I’ve been through stressful periods, I didn’t cope so well. Managing stress became something I had to learn how to deal with better. While dealing with this, I noticed while I was on a ‘good’ salary (well, it was Celtic Tiger times after all!), I hadn’t much money in the bank at the end of the day. Not a nice realisation. My theory now (in my 40s, older and I like to think, a little wiser) is to face truths head-on. Make changes where possible. I don’t believe in beating myself up for the past. ‘Learning periods’ sounds so much better than ‘mistakes’, doesn’t it? So I had some serious learning periods throughout my 30s.
So there I was, mid 30s, and I hadn’t much to show for the earnings I knew had been processed through payroll and deposited in my current account throughtout the years. Nothing like a P60 at year end to make you realise you had money and had a nice salary. What had I to show for it at the end of the year in the bank? Not enough. I did save. A little though. Not as much as I’d have liked to when I looked back. Where did all that cash go? I liked to shop online. I guess I was in the office a lot and, without getting too philosophical, I was shopping to fill something… whether it was a void or a distraction, I won’t go into too much here, but nonetheless, I was shopping for clothes when I had new clothes on hangers with tags still intact. Clearly not the best investment of my pay or my time!
So I got myself in gear. I decided to put money by every month and started watching exactly where the cash was going every month.
I worked backwards. I did a little spreadsheet (yes, all accountants love excel, why not have a personal budget to look at each week). I worked out what I had to pay every month, allowed a little for unexpected bills at first and kept a little cash for credit card bills for personal (let’s call it ‘female shopping’, hair dressers and other necessities) bills. While I believe it’s a privilege to grow old, I am nowhere near ready to let the greys keep coming!
So, working backwards, I realised exactly how much I needed for the average monthly bills. Everything after that went to savings. A basic deposit account at first. I needed to know I still had access to money ‘just in case’ something came up that we weren’t expecting. In a few short months I had a grasp of how much extra I could save and found it seriously interesting and a little challenging, to save a little more if I could each month.
From there, I put by enough to feel secure in the knowledge that if I wanted to pack it all in tomorrow, I have enough put by that I don’t have to worry about finding work or paying the bills for some time.
To know I was (and am) doing what I love because I choose to, is fantastic. Going to work every day becomes a choice and when you feel you have choice, you feel free.
To me, this defined financial freedom.
As I mentioned earlier, this is a personal story. For many clients, wanting to pay down their mortgage, have money in the bank for the future of their children, knowing they can take the annual holiday and not worry about money, can feel like financial freedom. We can all define it for ourselves.
What I would like to do is get you thinking. Ask yourself, what does financial freedom look like to me?
From there, we work out how much we need to have in the bank, how much in savings and investments or insurances. We work back what we have now and what we need to start putting by or think of way of earning more. This is where focusing on your profit levels and your where you spend your time, comes into the picture.
When you become laser focused on earning more, with a goal to become financially free, you start to think of new ways to earn income. You become seriously focused on how you spend your time. We talking about ‘time being money’ and in other articles this is discussed in detail. TIME IS MONEY. Where and how you spend your time will determine your financial success in life.
ACTION POINT –
Write down what financial freedom looks like to you right now.
Decide you will become one of the highly motivated and focused people who have decided to become financially free in the coming years, to retire when you want.