Should Financial Independence Enrich Our Lives Or Define It?

Recently, I was sitting amongst a group of thrifty friends discussing financial independence (FI) and how important it was to each of us. Some of the discussion was around the definition of FI, and I learned that the definition of FI differs from person to person. Some of the discussion was around dates and amounts of money needed to meet FI. Most of the discussion focused on how important FI was to the group. After about an hour or so of discussion, it occurred to me that FI was the only topic we discussed. There was no discussion of life goals (beyond FI), family, friends, work, sports (Go Astros!) or recent adventures. I found that a bit interesting. On the one hand, FI was a central theme to everyone there. That’s no surprise. Clearly, FI was a top goal for each of us. But on the other hand, is that all there is to our interests and pursuits? Don’t get me wrong, the conversations were interesting and spirited. I really enjoyed it. But it left me asking: Is there more to our lives and our friendship than financial independence?

Which precipitated the topic question in this post: Does financial independence define our lives or does it enrich our lives with the freedom to pursue the goals and dreams in our hearts?

Financial independence: What Is It?

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Financial independence (FI) is a term often used without consistent meaning. Typically, FI means having enough income to pay your living expenses for the rest of your life without having to work full time or be dependent on others.  It also usually includes being free from debt, worry and anxiety about money. Some simplify the definition and see it as simply being self-sufficient. While each person might define it differently, it was obvious that FI was the primary focus for each of us. But in this particular conversation, FI was the only thing being discussed. Aren’t we more than the pursuit of financial independence?

A Case For FI To Define Us

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Starting with a little help from Webster’s Dictionary, being defined by financial independence means to be described or identified with the nature or essential qualities of financial independence. In this case, that means, identified as being frugal (living below their means), having ample income outside of a regular full time job to meet all money needs, dependent on no one other than themselves, free of debt, free of worry and free to pursue one’s goals or dreams. Sounds worthwhile so far!

People pursuing financial independence are passionate people in their pursuit. Usually focused, committed and goal orientated, or obsessed. Saving and investing, combined with the magic of compound interest, is intoxicating and satisfying. Each goal met just increases the desire for the next FI milestone. In addition, FI can be viewed as a great way to provide or support your family, so it is easily perceived as honorable, wholesome and worthwhile. Still sounds pretty good to be defined by our pursuit of FI!

Sometimes, it helps to find answers by looking backward on life decisions, so it begs the question: On my deathbed, will I be satisfied that my life was worthwhile and all that it could or should be if I defined success as being financially independent? Does my pursuit and ultimate achievement of financial independence completely define me and my purpose on earth?  This view of the topic question starts to shed doubt in my mind that FI should define us because it seems too narrow. Why? Because it seems to me that life should be so much more. I can’t image my tombstone saying something like “Here lies Mike, who pursued and achieved financial independence.” I’ve never seen one of those tombstones. But I have seen tombstones that have listed many other attributes to define the deceased: father, husband, Christ-follower, man of integrity, leader, brother and son, to name a few. This leads me to believe there is more to life than just being financially independent.

 

A Case For FI To Enrich Our Lives

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There is no doubt that money is absolutely necessary to live and the more you have of it, the more freedom, and choices, you have. So having money is very important. And making or getting money independent of full time work is extremely desirable. But money and financial independence do not define us, but enhance  our lives and the possibilities.

Money is just a tool for us to use to meet our goals and obligations. Whether those goals are to raise a family, travel, buy a home or eat dinner, money is just a mechanism to achieve those goals. So to define ourselves by being able to meet those needs, independent of full time work or any dependence on anyone else, seems to be too limiting. I’m not defined by other tools that I have, like a computer, a hammer or a pencil, so why would I be defined by the tool of money independently obtained from full time work?

 

Means To An End

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We are so much more than our money or possessions. Which means that we are so much more than our pursuit and achievement of being financially independent. We are (in my case) a husband, father, Christ-follower, businessman, leader, neighbor, friend, a brother, an uncle, a son, travelers and so much more. The financial independence we pursue is a better way to be all those things. But FI doesn’t define us. To let FI define us is to sell ourselves short. The faster we get to FI, the better, because we can spend more time doing what we want or are called to do, and less time working full time to make money. So financial independence enhances our lives.  It does not define us.

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So, going back to that conversation that started of this post: There’s nothing wrong with talking about something you are passionate about, like financial independence. And having deep conversations with friends and family about FI is encouraging, invigorating and informative. But since money is just a tool and being independent of full time employment is just a better means of making it, it stands to reason that financial independence is simply a means to an end. A means to achieve one’s goals in the best possible way. A means to freedom.

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My Love Is Unconditional, My Money Is Not!

As parents raising children, we are called to love our children, equip them for life, and lead them in the way they should go to lead happy and productive lives. A large part of being a parent is to introduce our children to unconditional love. A love that transcends behavior and choices and focuses on loving them for who they are. A parent’s love truly is unconditional…

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…but that doesn’t mean they can be irresponsible or entitled with money! In fact, one of the first lessons parents need to teach their children about money is that money, and the making and spending of it,  is very conditional. Here are some basic tenets about money that should be impressed upon our kids:

  1. We are paid money for producing results. For the most part, we get paid in our work based on the value we provide. Provide lots of value, get paid lots of money. But the opposite is also true: provide little value, get paid little.
  2.  There’s a BIG difference between being financially free and making lots of money.
  3. Wants and needs are VERY different things.

Taking these very basic money rules into account, here are four parent teaching moments in the lives of our children when it comes to money and the path to financial independence:

Money Does NOT Grow On Trees

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It does not take very long for a child to learn that if they want something, they say: “Mommy, I want this?” To which, sometimes, the mommy pulls money out of her purse to pay for the desired item. Mommy gives the clerk some money and then the child gets to keep the desired object. Wow, that’s easy. It seems, at least to the child, that it is even easier when mommy “pays” for the item using that little piece of plastic called a credit card: Pull out card, swipe and voila! Easy and fast. The realization that money, especially when using a credit card,  can be rapidly exchanged for desired things is quickly followed, usually, by the fact that the child can find many wants. “Mommy, I want this, and this, and this….well, you get the picture. Which brings us to the first set of Money Lessons and Conditions (Yes, I said set of lessons):

  1. Money is in limited supply, it does not grow on trees (or magically within a credit card)
  2. As a child, mommy or daddy get to determine the best use of the family money
  3. Big finish: The child MAY get to use some of the money, but they are NOT entitled to it! Especially not whenever they want it.

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Wants And Needs Are Two Different Things

As stated earlier, a child learns very quickly to express the desire for many things. The request for stuff can be endless as most kids have seemingly endless energy to express those wants…until a parent teaches their child the difference between wants and needs, as well as the difference between yes and no! A need is something the child requires to grow (like nutritious food), wear (like proper school clothes) or develop (maybe athletic shoes, glasses or some pencils). But a want is strictly discretionary. My favorite line with my kids, when they were old enough to understand it, when they started expressing all their wants, was to say “Well, I want a Ferrari, but we don’t always get what we want.”

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Which leads us to the second set of Money Lessons and Conditions:

  1. Wants are completely different than needs. Your needs will be provided for. Your wants will be taken under consideration.
  2. Your (the child’s) desire for a want will be noted, and when a parent decides either to purchase, or not to purchase an item, that parent’s yes means yes, and a no means no. Period.

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Fair Is A Place To Take Rides And Eat Bad Food

“That’s not fair!” A parent may hear this often. “It’s not fair that a classmate got a new bike, or new video game or new app”…so the child exclaims. The list of unfairness can go on and on. It is important for parents to explain that fairness has little to do with anything, and frankly, that life is not fair and you better get used to it. Fairness stems from comparison. And comparison can lead to envy and discontentment. We compare ourselves to friends, neighbors or what we see on TV. It is important for parents to remember and teach that what our neighbors do should have no bearing on what is best for our family.

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Which leads us to the third set of Money Lessons and Conditions:

  1. Wants are completely different than needs. Your needs will be provided for. Your wants will be taken under consideration.
  2. Just because a neighbor or friend gets something doesn’t mean you automatically get it. (Don’t covet)
  3. Funding family goals and dreams are a priority over instant gratification

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You Do Your Part, I’ll Do Mine

This one is my favorite. We must, as parents, teach our kids that work, and good behavior, gets rewarded AND that the opposite is also true: You don’t do your work, or you have a bad attitude, and you will not be rewarded (or paid). You get paid your allowance when you do all your chores. Don’t do your chores, don’t get paid. In my family, a school aged kid has one priority: learn in school to the best of their ability. Essentially, school is their job. Don’t do your best in school? You lose privileges. If you don’t study for a test, then get a bad grade, you don’t get sleepovers and shopping trips to the mall. Essentially: You do your part and I’ll do mine.

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Which leads us to the fourth, and final set of Money Lessons and Conditions:

  1. There are rewards and/or consequences to our actions. If you do your part, I’ll do mine. But if you don’t, then I won’t either.
  2. Responsibility brings value (and is rewarded). Irresponsibility, not so much
  3. I don’t care how much you want something if you’re not willing to do your part of the agreement (Earned vs. entitlement)

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Final Note – Unconditional Love Means Money Conditions

It’s our responsibility as parents to train our kids in the way they should go…in their actions, behaviors and decision making. Especially when it comes to money because neither our school systems or our culture will or can give them the solid foundation they need when it comes to money and the pursuit of financial independence. The first time I heard a parent use the phrase “my love is unconditional but my money isn’t” seemed a little harsh. But the more I processed the concept, the more I realized it was both responsible parenting and very loving. Teaching our kids that money, rewards and promotions are very conditional helps our kids develop the work ethic and fiscal responsibility they need to take care of themselves and form a proper relationship with money.

My love is unconditional but my money isn’t!

What Do Aging Athletes And Financial Independence Have In Common?

I am passionate about sports and I have been that way for as long as I can remember. More so playing them than watching them but nevertheless, passionate. It was football, baseball and basketball in high school. Then, football and baseball in college. Followed by softball, basketball, tennis, cross-fit and competitive running thereafter. And all the while, I have lifted weights and worked out as a way of life. I love it. It makes me fit, I feel good and it’s cheaper than a psychiatrist when it comes to working out your daily problems! But over time, or more specifically, advancing in age, has a way of catching up to you when it comes to physical performance!

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I remember playing sports in my twenties and it was so easy to perform: Stretching the muscles was easy, as was gaining strength and endurance. If you got a little bit out of shape, you were able to get it back really fast. It wasn’t until I turned 34 that I realized my first reduction in athletic ability. I lost a step. I was moderately fast and running the bases while playing softball I was thrown out going from first to third on a base hit. For the first time ever!  This was my first dose of reality that athletic ability diminishes with time.

Then, I went into my forties. Now I was introduced to regular soreness after working out, coupled with a longer time period to fully recover from the workout. What used to take 24 hours to recover now took at least 48 hours. In addition, it took considerably longer to get in shape. At a twenty something, it felt like three weeks of solid work would produce a great fitness level. But by forty something, it took every bit of eight or nine weeks to feel really fit and even then, I wasn’t sure if I had reached the highest level of fitness. The other side of it was also true: As a forty something, it felt like six or seven days of not working out resulted in losing every bit of fitness and you had to start over again from the bottom of the fitness ladder!

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Then I reached my fifties…and a further reduction in athletic ability, with more aches and pains, and longer recoveries. It was in my fifties that I had to fully accept my physical limitations as an athlete. I could no longer deny that past performance levels were long gone and unreachable.

What Do Athletics Have To Do With Financial Independence?

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At this point, you might be asking, what does athletic ability have to do with financial independence? And I would understand if you did. But follow me here for just a moment. Because the lessons learned as I have aged as an athlete are directly applicable to the process of obtaining and maintaining financial independence. How, you might say?

First, It’s About Time

As an aging athlete, it takes time to get ready to perform. Much more time than it used to as a younger athlete. You need to take the time to fuel your body right before the workout. You also need to stretch and stretch a lot. In other words, you need to be patient  and prepare correctly before you can really perform.

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The same is true with the pursuit of financial independence. It is over time that one can develop wealth. It usually doesn’t happen overnight, and, expectations to the contrary can build unwanted anxiety or stress. To build wealth that can lead to financial independence requires saving and investing money over a long period of time, in order to produce a return. This patient approach to building wealth, and as a result, financial independence, is both time proven and considerably less stressful. There’s one more piece to the time element to develop wealth and that is compound interest.

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Saving money over time is only the first part of the equation. The second part, and largest part, is investing the money and letting compound interest work to develop an exponential wealth effect. What does that mean? It means that investments over time will produce far more profits than the amount of money you actually put into the investments. It is a multiplying effect. An example: A one time $2000 investment with a 6% annual return will yield $xxx after 40 years. But if you left it accumulate for only 20 years, half the time,  you don’t have half of the 40 year amount, you have only xx% of it. It takes an investment in time, using compound interest, to develop wealth, and it grows more and more each year. Just like it takes time as an aging athlete to prepare for a workout to produce athletic results.

Limitations Can Be Your Friend

As an aging athlete, you have to recognize your limitations or else run the risk of hurting yourself. When I was 21 years old I ran a five minute mile as part of a fitness test in college as we were getting ready for my junior year of college football. I’ve got NO CHANCE of running that same five minute mile now, regardless of my preparation or efforts to perform at my best. I need to accept my limitations or risk being deeply disappointed or getting hurt when I tey. In essence, I need to be content with my diminished performance level.

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Contentment is also a key foundational element when it comes to financial independence. Without contentment (Being happy where you are, while on your way to where you are going), what you have will NEVER be enough. You will always think in your mind: “I need more to be happy, or rich, or successful, or wealthy, or (fill in the blank).” Part of being financially independent is to be independent of envy or perceived need for something to make you complete or happy. In fact, only when we can learn to be content in the moment, combined with gratitude for what we have, can we be truly independent of envy, covetousness and the sense of lack. There is certainly nothing wrong with ambition, but when that ambition prevents you from ever feeling secure, peaceful or blessed, you can never truly be financially independent.

Three Cheers For Consistency

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As an aging athlete one of the most important fundamentals of working out is consistency. You need to consistently stretch, consistently eat right, consistently hydrate and consistently work out because of what I mentioned before about losing your fitness level fast! When you can get into the appropriate consistent rhythm, your workouts and performance can be very rewarding.

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The same is true when it comes to financial independence. I have found that most financially independent people I have met didn’t hit the lottery or write a best selling novel to develop instant wealth, but built that wealth over time with consistent savings and investing. What do most of the financially independent people do consistently:

  • They save money consistently
  • They invest consistently
  • They live on a budget in order to meet their goals consistently
  • They track goals consistently to stay focused and on track

Consistency also lessens the sting of living below your means. If you consistently put money into an emergency fund, a retirement fund and a vacation fund, you eventually get used to that money being “gone” and you don’t miss the spending power in your day to day budget. Consistency is so important to old athletes and people pursuing financial independence alike.

Taking Advantage Of Technology

As you get older, an aging athlete is wise to take advantage of new technology to increase their performance, and comfort. There are new fabrics on the market that wick away your sweat while you perform. Running in the Texas heat, I depend on moisture wicking clothing. There are new shoes of all types that help you run faster, farther and with more comfort. There are new training apps that help you work out at peak performance. There is an abundant amount of new technology that can help you better perform.

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There is also new technology to help you obtain financial independence. There are tools like Mint to help you track your expenses and budget, Acorns to help you save spare change, Robinhood to help you invest and most banks now have automatic deposit and withdrawal for 401K plans and emergency savings accounts. Use technology to achieve your financial plans: In most cases it is easy, cheap (as in free), automatic and efficient.

Last, Know Your Why

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Motivation is paramount when it comes to working out or achieving financial independence. People ask me all the time: At your age, why do you workout so hard, and so consistently? It’s easy. I do it because it makes me feel great, it clears my mind, it challenges me and it helps me sleep so soundly. In other words, my “why” is to feel better and, God willing, live longer. It is worth it to me to put the effort in now, to feel better later. We need to “know our why” in the pursuit of financial independence too. We need to know why we are budgeting, saving and investing because it sure would be fun to live life unrestrained now. It would be fun, but it would not help us reach our goal of financial independence. Our financial independence “why” we sacrifice now is so that we can be independent later. Independent of money worries or stress and to be independent to follow our heart’s desire. To move working from something we have to do to survive, to something that we choose to do if we want to. Financial independence is not easy and it does not happen overnight. Just like trying to get into and staying in shape as an older athlete. But by using time to our advantage, practicing contentment, being consistent, taking advantage of technology and knowing our why, we can better enjoy the process and eventually achieve the goals of feeling good and experiencing financial independence at any age!

If you want more information on financial independence and/or the steps to get there, consider Dave Ramsey’s book “The Total Money Makeover”. Click the image to enjoy instant savings.

The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

Three Common Misconceptions About Money: A Biblical Perspective

I am passionate about the pursuit of financial freedom, which begins with putting money in its proper perspective as a tool to be used to provide for ourselves, our families and to fuel our goals and values. I am equally passionate about dispelling misconceptions of money which can distort our view of money into something that it is to not. I have found in my life that the single best financial management book of all time is God’s Word, the bible. It is from the bible that we can truly discern what money really is and how to properly use and manage it.

All that being said, here is some straight talk from God’s perspective, about some common misconceptions about money.

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Misconception #1: Having Money Is Evil (Or The Root Of All Evil)

You may have heard that money is the root of all evil. That argument goes something like this: “Money is evil because having money makes people greedy, and not having money makes people desperate. Both tend to make man evil. Doesn’t the bible say that having money is the root of all evil?”

Let’s set the record straight. God did not say money is evil. God said the love of money is a root of all kinds of evil: 1 Timothy 6:10

“For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.”

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God neither hates or loves money, but He gives it to us to use for His purposes: To provided for ourselves, our families and to worship Him and His purposes, including helping others around us. God wants us to work hard and earn money. Proverbs 10:4

“Lazy hands make for poverty, but diligent hands bring wealth.”

God also wants us to enjoy the money He provides for us. Ecclesiastes 5:19 states this:

“Moreover, when God gives someone wealth and possessions, and the ability to enjoy them, to accept their lot and be happy in their toll – this is a gift go God.”

God also wants us to use money to provide for our families: 1 Timothy 5:8

“Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.”

Last, God wants us to use money to help others: Luke 10:35. This is the story of the Good Samaritan, who took pity on a man found in the street after being robbed and beaten. The Samaritan tended the man’s wounds and took him to a local hotel to heal:

“The next day he took out two denarii (money) and gave them to the innkeeper. “Look after him,’ he said, ‘and when I return, I will reimburse you for the extra expense you may have.'”

The Samaritan man was able to help because he had money to do so. Money was a tool he used to help a person in need. It is quite possible that if the Samaritan man did not have the money, he would not have been able to help the man in need.

Money is not evil. It is just a tool that comes from God to be used for God’s purposes. We should not feel guilty about building wealth, nor should we worship the wealth we do build, but view it as the tool that it is.

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Misconception #2: Wealth Should Be Equal

It is common to hear children, when playing a game, say something like “That’s not fair!” when they think someone cheated or broke the rules.  It is also common for children to demand equality when candy or prizes are handed out, and to say something like “He got more than I did” when there is inequality in the handouts. I have heard adults apply some of this same logic when it comes to money and wealth. They might say “All people deserve the same money, regardless of job or skill level.” Or, “All wealth should be divided equally among all people.” But, being fair does not mean being equal when we look at wealth in the bible. In fact, God says that each should receive according to his ability: Matthew 25:15

“To one he gave five bags of gold, to another two bags, and to another one bag, each according to his ability…”

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I believe God wants each of us to use our God given talents to the fullest. From those talents we will develop our wealth. And since our talents are all different, the amount of wealth may be different. There is no reference in the bible about everyone getting an equal share of wealth regardless of talent, effort or responsibility. You might say being poor is not fair. And that might be true. There are many reasons for poverty. But God recognizes that poverty exists and also recognizes that wealth is not to be systematically equally distributed to those in need. In fact, God wants those that have much (wealth) to help those who are in need. Psalm 112:9

“They have freely scattered their gifts to the poor, their righteousness endures forever; their horn will be lifted high in honor.”

Jesus, when confronted whether or not a considerable amount of wealth (in the form of perfume) should be donated to the poor or used to worship Jesus, said: Matthew 26:11

“The poor you will always have with you, but you will not always have me.”

 

Wealth should be developed by each of us, according to our talents and efforts, for the purposes of providing for our family and for those in need. But the idea of equal wealth and equal pay regardless of talent and effort is counter productive as it demotivates those that are capable of developing wealth and encourages an attitude of entitlement and unfulfilled human potential.

Misconception #3: We Eventually Outgrow The Need For Budgeting, Saving & Stewardship

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Budgeting (a spending plan), saving and stewarding (managing with honesty and prudence) the money and wealth God provides us fundamental for all of us to do, regardless of the amount of wealth we have. There is no amount of wealth where it becomes unnecessary to manage that wealth wisely. First, let’s look at budgeting. God says this: Proverbs 29:18

“Where there is no vision, the people perish.”

We are responsible for managing this wealth and that requires a plan (vision) and in that plan is a spending budget. You might say, “But if we have extraordinary wealth, why bother with a spending plan because we will never spend too much?” But look what God says in Luke 14:28

“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?”

We must budget our money because its the only way to ensure our goals and dreams can be fully funded and realized.

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We must also always be saving towards those goals and dreams. Saving money is a critical part of being wise. God says in Proverbs 21:20

“The wise store up choice food and olive oil, but fools gulp theirs down.”

Not only is saving money always wise to be ready for those times of need (emergency) and for future goals (possessions, education, events, etc), but saving helps us learn discipline, contentment and gratitude, which are critical parts of true financial freedom. Saving also ensures that we will have wealth to share with those that are in need. In fact, God says helping those in need is one of the highest uses of wealth: Proverbs 28:27

“Those who give to the poor will lack nothing, but those who close their eyes to them receive many curses.”

Last, saving money ensures that wealth will be available to pass down to later generations and this is important to God. Look in Proverbs 13:22

“A good man leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.”

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Money Misconceptions

Money and wealth is not evil. It is neither to be worshiped or reviled. We should not feel guilty if we have wealth or ashamed if we don’t. Nor is money and wealth our everything. It is just a tool to be used to provided for our families, goals and friends in need. All to glorify God who gives us this wealth.

Neither is wealth to be systematically equal for everyone. Each person, according to their talents and effort level, should develop their own wealth. And then use that wealth for the good of your family, friends and people in need. We are all equal in God’s eyes as His children, but that doesn’t mean we automatically should expect to share in God’s wealth equally.

We are called to steward our wealth, because really, we don’t own it, it is all God’s wealth, we are just called to manage it. Psalm 24:1:

“The earth is the Lord’s and everything in it, the world and all who live in it;”

That means we must budget, save, plan and take care of our wealth as an act of faith and obedience. In fact, God says that each of us will give an account to Him regarding our actions, including the management of HIS wealth. Romans 14:12

“So then, each of us will give an account of ourselves to God.”

So we must take care of God’s money and wealth in every way, knowing we will be held responsible for our efforts and actions. Managing money should be considered a holy activity and an act of worship.

Money misconceptions are common and everywhere. But make no mistake about it that God wants us to have wealth, He just doesn’t want us to worship the wealth, or hoard the wealth, but to use it properly in ways that worship Him: Raise our families, help out people in need and to fulfill our goals, values and dreams that God gives us. Keep money and wealth in proper perspective as the tool that it is.

 

 

 

 

Miter Boxes, Mallets & Money: Just A Bunch Of Useful Tools, Sometimes!

Know Your Tools

It is important for a carpenter to know his tools. For instance, a carpenter who is a cabinet maker intimately knows how to use a miter box. And most people, especially carpenters,  know what a hammer is and basically how to use it. Actually, there are several types of hammers that specialize for different functions. There’s is the claw hammer, sometimes called a common hammer, a ball pein hammer, a club hammer, a framing hammer, a sledge hammer and many more that make up the hammer family. Then there is a mallet, which is similar to a hammer but not exactly the same thing. A mallet is a hammer with a large, usually rubber or wooden head, used especially for hitting a chisel. It is the right hammer for wood carving and delicate wood working. But when you use the right hammer in the wrong application, it can be bad, even painful. See, one day, a while back, I used a mallet to try and knock some flooring into position. The flooring was heavy and I  didn’t want to mark the flooring so I used a rubber headed mallet to try and knock it into place. I should have picked up the flooring and moved it by hand, but I was tired and it was late and I had the mallet readily available. So I pounded at the flooring to move it across the floor into place. All went well until it didn’t…on one particular swing I got distracted, took my eyes off the flooring and proceeded to hit myself in the foot with a heavy blow. My initial reaction to hitting myself in the foot was one of embarrassment. But as the sensation made its way to my brain, my embarrassment was quickly replaced with severe pain. It hurt so bad. Bad hammer!

You see, this was a classic example of using a perfectly good tool the wrong way, which resulted in the tool not being productive at all, but being a pain (literally) that hinders progress instead of contributing to it. I guess the moral of the story is that tools are very useful when used (and viewed) correctly, but can be counterproductive if used incorrectly.

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Money Is

Money is similar to a hammer in that when viewed and used properly, is a great tool that can help you achieve your goals, but when used incorrectly, can be counterproductive and possibly painful. Money, being a central part of financial freedom, must be viewed and used properly or else be counterproductive to the pursuit of freedom. This is a good lead-in to defining what money is, and by extension, what money isn’t.

  • Money is: A medium of economic exchange and a tool to build wealth. As a tool, it is like a hammer in that you have to get it (some), learn how to use it, take care of it, use it correctly and manage it so that it provides value to you.
  • Money is: A temptation. If you let money be your goal, be the focus of your desires and the answers to your problems, it can tempt you to worship it, hoard it and let it define you.
  • Money is: A test. As we learn each lesson about money we walk away a little bit wiser and a little better equipped to use it going forward. But if we don’t learn our lessons, we are doomed to repeat our mistakes.
  • Money is: A testimony. Our decisions (wise decisions or struggles) with money and finances in general, are a large part of our testimony to our spouses, peers, neighbors and children.

 

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Money Is Not

It is just as important to define what money is not. Although our western culture wants to paint a picture that money is the root of happiness, power, status and popularity, money is just a tool, not the basis for our identity. Let’s take a look at what money is not:

  • Money is not: A measure of success or our sole goal. There are many successful people that have a lot of money, but not having money does not make you unsuccessful. Likewise, there are/were some incredibly success people that had virtually no money. Many, if not most of your artists, missionaries and teachers fall into that category.
  • Money is not: A component of self-worth. Money is a tool, not something that defines who we are or our value to our families, communities and corporations.
  • Money is not: A reward for good living. Money doesn’t care if you are good or bad. Good living is a reward in itself. If you are a person of faith, you know that the true blessings are things such as peace, joy, love, grace and contentment.
  • Money is not: A guarantee of satisfaction. Money does not guarantee happiness or contentment. In fact, most people who look to money to be their source of satisfaction  never seem to have enough of it.

 

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Use It, Keep It, Take Care Of It But With The Proper Perspective

Money, when kept in the proper perspective (as a tool) and used correctly (as a medium of economic exchange and a tool to build wealth) can lead to financial freedom that includes peace, contentment, options and freedom from worry. But when used incorrectly, as a measure of success, self-worth or a guarantee of satisfaction, can lead to the opposite of freedom: Entrapment, discontentment, misery and, yes, pain, just like that mallet story I told earlier. Our lives change for the better (financial freedom being the main objective) when we view money as a tool and not as our goal.

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Free Money! What Do I Do With It?

Free Money!

Maybe its money from a long lost relative. Maybe its a business deal or stock trade that went far better than planned, or maybe its a big tax return check or a bonus. We all LOVE getting money we weren’t expecting. I call that free money! Boy, the possibilities start to enter your mind on how to enjoy that money! I’m not talking about the dollar bill you found on the sidewalk or the five dollar bill folded up in a pocket. Those finds are sweet, don’t get me wrong, but I’m talking about some serious money that could afford something big, like a vacation, a new car or a whole lot of fun! If you’re like me, my head can get filled with ideas on how to use the money real quick. So years ago, when I was in one of these sweet situations, I had to stop for a moment and come up with an approach to dealing with large amounts of unexpected money so that I would make the best use of this new windfall. I call it the 30/50/10/10 plan. Here’s my approach:

Before We Get Started

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Before we get started let’s do two things: First, take a moment and list your overall financial goals and objectives. It helps to look at the big picture before we get into the details. For me that’s pretty simple: 1) Live in complete financial freedom, 2) Provide for my family, 3) Responsibly help in my community, 4) Pursue our passions. What does that look like practically?

  • No debt, no money worry or anxiety, no dependence on others for our needs
  • Ample savings for emergencies, retirement, family/house needs, and college expenses
  • Live on a balanced budget and teach our kids to do the same
  • Tithe to our local church plus support some local charities
  • Travel!

Second, before we use the free money, subtract an amount for taxes and (in our case) our tithe so that we know the real amount available for use. Typically, that totals about 30% of the free money. This is the 30 in the 30/50/10/10 plan, meaning the first 30% of the free money. In other words, if we received $10,000 of free money, we would put aside about $3,000 for taxes and tithe, ( giving thanks to God and giving Uncle Sam his portion), then plan to use the remaining $7,000. By doing this, we eliminate a nasty surprise come tax time at the next of the year when the money is all spent and we have nothing to pay the taxes with. Now we are ready to use the rest of the free money. But what do we do with it?

Step #1: Pay Yourself (The “50”)

Since financial freedom is our top priority, always, we need to pay ourselves first, in the form of eliminating debts and/or adding to our various savings and investments. At least half of all free money goes to paying ourselves first. This is the 50 (50% of the free money) in the 30/50/10/10 plan. First step: pay off any outstanding consumer debt. Is there a credit card with a balance still on it? Pay it off first. No questions asked. If there is no credit card balance but there is a car loan balance or a student loan balance, we make payments to pay down that debt. Next, if we paid down our debts and we still have some of that half left, we pay ourselves by adding to our savings and investments in this prioritized manner:

  • Top off our emergency fund, if it needs it, which when full, stands at three month’s worth of expenses
  • Extra savings for upcoming household needs: replacement used car, replacement washer and dryer, etc
  • Money towards the kid’s needs: College 529? Summer camp?
  • Add to long term investments
  • The retirement fund already gets maximum contributions from the budget so it gets a lower priority for any free money allocation.

Again, about half of the available free money goes to paying off any debts and/or savings, with the hope that we can achieve a milestone of some sort that we then can celebrate as a family.

Step #2: Celebrate!

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Celebrate! Take some of the free money and take time to celebrate 1) the free money and 2) the debt reduction and savings milestones you achieved in step #1. If the free money allows us to completely pay off credit card debt. Awesome! Let’s celebrate that. If the free money allows us to purchase, with cash, a good replacement washing machine because the old one died, great, let’s celebrate. If we can put some money away for that next vacation, celebrate! You get the idea. Most people don’t celebrate saving money or paying off debt, but most people will get excited about achieving a milestone. Take the family out to dinner, or go to a movie, or something that everyone gets excited about.

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Let your kids know what you are celebrating so they connect the fun with the milestone. The celebration doesn’t have to be big. Just big enough to make the point that the free money is an unexpected blessing that allows you to obtain or maintain your financial freedom as a family. The money to celebrate is a portion of the first 10 in the 30/50/10/10 free money distribution plan. In fact, step #2 and step #3 (explained next) combined make up the full 10%.

Step #3: Meet Family Needs

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Now’s a good time to put some money aside for upcoming family needs. These are things like kid’s school expenses, clothes, a delayed car repair or shoes. This money can also go toward a date night with your spouse or attending a special event. This money allows us to catch up on “want” expenses. Those purchases or experiences that make you feel special but don’t qualify as a “must have item”, like an emergency fund or putting money towards retirement. As mentioned in step #2, the combined total of money spent in steps #2 & #3 is not to exceed 10% of the free money.

Step #4: Be Prepared…And Generous (The Last 10)

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Want to really experience financial freedom? Try taking 10% of your free money, after you have tithed, paid Uncle Sam, saved, eliminated debt, celebrated and bought something special for that someone special, and set it aside…for what comes your way. That’s right, set aside money for living, and helping, in the moment. Do you have a friend that needs a little help? Maybe that friend just lost her job and you feel like you’d like to bring over some groceries. Use this money! Maybe you get an opportunity to help a local charity. Use this money. Maybe you’ve got wedding/birthday/Christmas presents you want to purchase, outside your regular budget. Use this money. Take 10% of your free money and set it aside as a contingency to help and/or bless others as you feel moved to do so. You may be surprised how freeing this money makes you feel, because it gives you the freedom to act in the moment. This is the final 10 in the 30/50/10/10 plan.

Financial Freedom Is Better

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Coming into free money, that is, a large amount of money that you did not expect to get, is wonderful in and of itself. But free money that is allocated in a way that supports your financial goals following financial freedom principles is even better. Why is that? Because the money is allocated consistent with your long term dreams and priorities. Let’s recap the free money allocation discussed here:

  • We gave thanks to God for the free money (Tithe)
  • We set aside a portion for taxes so that there would be no “gotcha” come tax time
  • We paid off debt
  • We saved and invested money for future needs, emergencies and dreams
  • We celebrated the blessing of the free money
  • We invested in some family  wants
  • We set aside money for opportunities that come our way

That is great use of money we never expected to get. It is invested in both our present and future needs that the whole family will benefit from. This distribution of free money is also generous, grateful and opportunistic, which goes a long way in our quest to live in financial freedom. What do you think of the 30/50/10/10 model? Let’s us know what you think! However you use your free money, I hope you achieve and maintain financial freedom.

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Another (Different) Budget Example Of What Financial Freedom Looks Like!

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Back in May 2016, I published a blog post called: “Budget Example Of Financial Freedom” that looked at one couple’s budget and the freedom and options that resulted by eliminating debt, having a balanced budget and having savings that covered an emergency fund, retirement and savings for future purchases. This blog post sparked a number of discussions around one main topic: Is there ONLY one way to get to financial freedom?

The answer is NO, there are many ways to get to financial freedom, BUT all paths to financial freedom are built on the same foundation:

  • They have clear, shared goals
  • They spend less than they have.
  • They account for saving toward their goals
  • They eliminate debt and other non-essential expenditures to reach their goals

This blog post looks at a different couple who came to financial freedom in a different way from the couple I wrote about in May. But before we go any further, let’s talk about what financial freedom really is.

Financial Freedom – What Is It?

Financial freedom is defined as having the attitude and resources to live abundantly in each stage of life, free of worry, anxiety or money concerns, to completely live out the full vision and goals of one’s life. Many people have heard about the concept of financial freedom, but what does it really look like?

Financial freedom goes far beyond having a few bucks.  This freedom has five key components. Let’s take a look at those components and how they fit into your life

  1. VISION for how you want to invest your time, talents and money
    • Answer the questions: Why am I here? What am I passionate about? What does my life plan look like? The purpose of this Vision is not to rigidly plan your entire life, but to form a direction and plan of action to focus your efforts. Freedom to pursue one’s passions and goals is worth the effort to define one’s vision. How can you pursue your dreams when you don’t know what they are?
  2. PLAN (budget) that supports your vision and quality of life you want to maintain
    • A budget is simply a plan for spending your money that is consistent with the vision you have for your life. It’s making a plan for using your money instead of wondering later on where it all went. Good budget meets a couple criteria:
      • You live within your means: Only spend money you have
      • It includes savings for your goals
  3. DEBT-FREE approach to everything we purchase
    • A debt-free approach doesn’t mean we NEVER use debt, but that we use money we have whenever we can and when we use debt, we prioritize the elimination of debt in our budget. A wise man once said: “The debtor is slave to the lender.” There’s no slavery in freedom.
  4. A bias toward SAVING
    • Savings must be a priority in your budget. How much do we need to be saving? Let’s start the conversation at around 15% of our take home pay. Why? Because we need to have three types of savings for future needs: We need an Emergency Fund for when life throws us a curveball. We need savings for Retirement and we need to be saving toward known future expenses, like cars, furniture, kids, etc. Adequate savings allows us freedom to act when we want to.
  5. An ATTITUDE of contentment with where you are, and gratitude for what you have
    • Don’t compare yourself to anyone else, but be content with where you are. Contentment brings peace and peace is a large component of freedom. Gratitude focuses our mind on what we have instead of focusing on what we do not have. Be grateful, always.

Budget Example Of Financial Freedom

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Let’s take a look at a very good actual budget that allows for financial freedom. The difference between this budget, and the one I wrote about in May, is that this budget not only eliminated non-essential spending, but also included taking on side jobs to increase income in order to experience financial freedom.

On the income side, this husband and wife couple wanted to have more room in their budget for their dreams of traveling and experiencing foreign cultures. So they both decided to add small side income streams to give them some breathing room. He started some multi-level marketing for a health products company that comfortably brought in an extra $500/month and had the possibility of being a passive income stream even when he was traveling. She started a dog walking business that added $200/month. Combined they added $700/month of income to their budget, agreeing to save at least $500/month, or $6,000/year to go towards their dream: international travel.

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On the expense side of their budget, the couple had a real breakthrough. They realized they spent money on things just because they always had, or just because their friends did too. Realizing that international travel was their passion but was never funded in their previous budgets, they put all of their expenditures through one quick thought process: Does this cost we incur add to our lives as much as foreign travel will? If the answer was yes, they kept it. But if the answer was no, they cut it, knowing they could add it back in later if their quality of life suffered. This is what they decided to do:

Note: The budget is shown as a percentage of Net Spendable Income (NSI). NSI is your total income, minus taxes and charitable giving, usually represented on a monthly basis.

Category                              Budgeted $            Includes                                                                         

Housing                                    25% of NSI           Includes rent/mortgage, taxes, insurance, HOA

Utilities                                       5%                        Electricity, water, gas, trash, internet, cell

Autos                                            8%                       No car payments, insurance, gas, repairs

Food                                            14%                       Groceries, toiletries, beauty items, eating out

Insurance                                   0%                        Medical and life insurance through employers

Medical                                       1%                        Prescriptions

Retirement Savings                12%                      401K plus company match of 3%, totaling 15%

Savings for upcoming needs  10%                    Saving for new (used) car, furniture, etc

Travel budget                                15%                    At least two international trips a year

Entertainment/Clothing           5%                    Clothes, eating out gifts, pets,  misc.

Misc                                                 5%                    Cash, Christmas, laundry, beauty, etc

Total:                                           100% of NSI

This is a very good budget, with ample savings and no consumer debt. This budget is sustainable and takes care of the family’s goals, namely:

  • Saving aggressively for retirement
  • Saving for their dream: international travel
  • Balanced budget: Spending less than they have each month to fund savings
  • Ample (6 months of expenses) emergency fund – not shown in budget
  • No car or consumer debt! They determined it was better to drive an old car than a new one with a car loan on it

To Each Their Own…Budget

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Each budget should reflect the goals and priorities of that particular person or family. In this case, they were willing to do extra work (to add additional income sources) and do without a bunch of things (cable TV, new cars and meager eating out, clothing and entertainment budgets). But every budget must make room for savings, must eliminate debt and must never allow expenses to exceed income in order for it to be sustainable. And a  sustainable budget is a large part of the puzzle to live financially free.

After one year of living on this budget, this couple made a couple modifications, but they were sure they made the right decision to add some income and omit some expenses in order to fulfill their dreams of travel. As such, they didn’t view their budget cuts as sacrifices but as blessings for them to experience their dreams and live financially free!

Do you have a financial freedom story to share? I’d love to hear it!

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An Unconventional Path To Financial Freedom

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Financial freedom is frequently associated with making enough money to independently afford the lifestyle of our dreams. But this family approached financial freedom from a totally different perspective: How a quick series of disasters and bad luck forced a family to reconsider their lifestyle and make the tough decisions that ended up in a “Less Is More” financial freedom success story. Read on to be inspired by an unconventional path to financial freedom!

The Worst Day

The day started out well enough: This couple (We’ll call them Bill and Jeanette) in their forties had two well-paying jobs, he was an engineer and she was an accountant. They lived in a large four bedroom home, even though their last child had finally graduated from college and was out of the home. Their finances seemed solid but they had some debt: a mortgage, two car loans and some credit card debt. They were saving some money towards retirement but it was not a priority. There emergency fund was small. It was a pretty normal American financial scene in their household.

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Then one hot August day it all got startlingly shaken: First, on the way to work, Bill got into a car accident (no fault of his own) that ended up totaling his car. If that wasn’t bad enough, when he finally arrived at work, he was informed that his good paying job was being eliminated and he had a twelve week severance period (25 years on the job) to find new work. In the meantime, Jeanette also encountered some unexpected trouble. She fell while on the job and broke her right (writing) wrist. The wrist injury would require surgery and at least two weeks out of work. In an instant, their somewhat stable work and home life was upended, putting strain on their marriage and finances.

The Situation

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The situation seemed pretty dire: Down to one income, one car and one healthy worker between the two, this family had to make some big decisions. They summarized their situation as so:

  • The large house and debt was too much for the one income
  • Medical bills compounded the financial strain
  • Their savings was woefully inadequate, maybe a month’s worth of expenses at best
  • They already knew they were not set up well for retirement
  • Bill had no job and little enthusiasm to find a new one like his old one
  • Significant strain on their health and marriage

The Big Decision

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Fairly quickly, this husband and wife team made some big decisions: First, before Bill even found a new job, they would downsize their home and lifestyle. This downsizing would have three main goals:

  • Lower expenses which would free up money to eliminate debt
  • Start seriously saving for retirement and building an appropriate emergency fund
  • Attain and maintain financial freedom

They asked some hard questions of themselves, like:

  • Do we need this much house? Clearly not
  • Do we need two cars?
  • Do we need these high lifestyle expenses: big cable TV bill, lots of eating out, lots of discretionary purchases, unused gym, Hulu, wine club memberships, etc
  • Can we thrive on only one professional income?

The breakthrough came once they realized that these things (house, jobs, cars, etc) did not define them individually or as a couple. They realized, too, that this situation was a real opportunity to re-think who they are and what they are working towards.

The Plan

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With much excitement and anticipation of a better future, the plan came together quickly. Immediately they made financial freedom their purpose and being able to retire in less than 10 years their goal. This is what they decided to do:

  • Sell the four bedroom, four bath house and downsize to a two bedroom, 2.5 bath house about 30 minutes further away from the city they lived in to get a better value.
  • Aggressively eliminate total credit card debt with existing savings and some of Bill’s severance money.
  • Take the insurance money from the totaled car and pay off the totaled car auto loan. Try to live with one car.
  • Live by a budget. This budget was targeted to be 40% of the previous spending level
  • Reduce their lifestyle. No more cable, gym membership, endless eating out and mindless spending.
  • Fully fund their retirement funds each year

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They met with their realtor (after the successful wrist surgery) and after a while put up their home for sale. It took three months to sell, but at a nice profit. With the house sale proceeds they paid off their credit card, paid off the first car loan and funded their emergency fund (also using a portion of the severance package). They also set up automatic (full) funding of their retirement accounts and made a new family budget. As a result of these financial moves, they realized they had a new opportunity: With the new budget, only one car and no debt, they learned that Bill did not have to go back into a full time professional position. Bill could, if he wanted to, be the artist/craftsman/amateur farmer he had always wanted to be! After much thought and prayer, they decided to make the big move and Bill began setting up his new career(s).

The Math

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It took another month after the house sale (four months after putting their house on the market) to move into a comfortable (1,800 s.f.) home. The previous home was 4,500 square feet. Not only were they able to take their home downsizing profits to pay off debt and supercharge their retirement fund, their new monthly operating costs of their smaller house dropped more than $1,800 between the mortgage, taxes, HOA and utilities! Between those savings and the savings from reducing cars and their lifestyle they were able to take out more than $3,40o of expenses per month! See the budget below.

Bill and Jeanette’s New Monthly Budget

Income:    $7,200 ($6,400 Jeanette, $800 Bill…and growing)

       minus ($1,900) for taxes and tithing

Net Spendable Income: $5,300

Expenses:

Total Housing:    $1,450 (Small mortgage, utilities, taxes, insurance, no HOA)

Auto:                      $ 285 (Gas, insurance, minor repairs – newer car)

Debt:                       $ 0 (Hurray!)

Savings/Retire:   $2,300 (401K, SEP, investments, etc)

Food:                     $ 425 (Includes eating out)

Entertainment: $ 300

Medical:               $ 250 (Prescriptions and HSA funding (savings))

Misc:                     $ 290 (Toiletries, gifts, etc)

The result is a balanced budget, with more than $2,400/month going into savings (45% of budget). There is no debt, a fully funded emergency fund (six months of expenses) and ample financial peace. In addition, Bill’s new artist/craftsmen venture not only feeds his soul but continues to grow slowly, with upside to add more to their monthly income.

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From Tragedy To Transformation

Bill and Jeanette turned a tragic day into a transformation to financial freedom. By looking at the abrupt disruption thrust upon them as an opportunity to break out of their rut and take action, they were able to achieve financial freedom. Here’s a short list that describe’s their financial freedom:

  • Balanced budget on their combined incomes
  • 45% savings rate
  • No consumer debt. Only small mortgage on house, to be eliminated in 8 years
  • Full emergency fund
  • Aggressive retirement savings to support retirement in 10 years
  • Bill was able to change his career to pursue his dream
  • Smaller house, simpler lifestyle, more peace, more contentment

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Truly, Bill and Jeanette turned tragedy into a contentment-filled, simple lifestyle that allows for current and future dreams to be realized and opens the door for more freedom and options. Now that’s financial freedom!

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5 Don’ts For Financial Freedom

Financial Freedom – What Is It?

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Most people have a fairly good idea of what financial freedom means to them. For some it is simply having no bill collectors calling them. Or maybe a little money in a savings account. Others might define it as simply being rich. Having more money than you could ever spend in a lifetime. My definition tends to fall in the middle: As having the attitude and resources to live abundantly in each stage of life, free of worry, to completely live out the full purpose of one’s life. In any case, just about any definition of financial freedom tends to focus on what we DO want (money, time, savings, etc) to eliminate what we DON’T want (worry, anxiety, debt, etc).

Let’s take a step back and focus on the underpinnings of financial freedom. That is, the attitudes and mindset in order to attain the freedom and then maintain it. There are two main attitudes, I believe, that allow us to become financially free: Gratitude and Contentment. Gratitude allows us to appreciate what we have and stay away from focusing on what we don’t have. Contentment allows us to have peace in our current situation, whatever the circumstances.

How Do I Get This Gratitude And Contentment?

Gratitude and contentment come with a pretty clear set of DON’Ts that go a long way in allowing us to obtain and maintain a basis for financial freedom. So, with no further ado, here are five don’ts for financial freedom:

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  • Don’t let things you own define you

Your car doesn’t define you. Your bank account doesn’t define you. Nor your home, your toys or your barbecue grill. Your stuff doesn’t define you and neither does your neighbor’s define them. When we look at our stuff to define us it quickly leads us to comparison. Comparison steals joy and peace and definitely steals contentment.

  • Don’t let fear rule you. 

When it comes to our finances, fear makes us defensive, negative and “playing not to lose”. The result is worry and anxiety, neither of which bring about the feeling of freedom. When we experience fear, we lose our gratitude for what we have and the blessing that it is,  and instead, focus on the potential of losing it.

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  • Don’t focus on scarcity, focus on abundance

Fear focuses on scarcity, or the sense that there is not enough (money, peace, possessions, etc). Gratitude focuses on the abundance we have in our lives, however little we may have.   Gratitude is thankful for what you have/had, fear focuses on the loss or lack of it.

  • Don’t view success as keeping things the same. Change is constant

Accept the fact that things change over time. If you view success as keeping things always the same, you will eventually be disappointed. Accept that change is constant and inevitable. Here’s a thought process I use to stay grateful: When things change, I give thanks for the opportunities or experiences that I had instead of focus on the loss when it changes. I had a sportswear for 7 years and drove it everyday, but one day, I had to sell it. I gave thanks for the seven years of fun, not on the fact that I no longer had my dream car.

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  • Don’t strive for comfort, strive for freedom

Robert Arnott is quoted as saying: “In investing, what is comfortable is rarely profitable.” Comfort is rarely profitable and can limit personal growth. Many times when we are comfortable, our gratitude slips away. Instead, strive for freedom in your finances, which does require some risk (investment) that builds the wealth that provides the freedom.

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Having an attitude of gratitude and contentment is the foundation of living financially free. Yes, we need to save money for future needs, eliminate our debt and live within a balanced budget. These actions are fundamental to financial freedom. But unless we are grateful for everything we have or experience, and content with where we are in our lives and who we are, we will never truly experience freedom from money worries, fear of unpreparedness or comparison with our neighbors. When we are financially free, our options open up and our dreams can become realities. The interesting thing about having an attitude of gratitude and contentment is that once you have them, material things and your circumstances matter far less and that magnifies your financial freedom even more.

Financial freedom: It’s not easy, but it is worth it!

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The Secret Sauce For Financial Freedom

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Financial Freedom – Huh?

Financial Freedom is about having choices. Having the liberty to chose without restraint. Since our finances (money and possessions) are simply tools for us to use to meet our life’s goals, financial freedom is defined as having the attitude and resources to live abundantly in each stage of life, free of worry, to completely live out the full purpose of one’s life. 

Financial freedom goes far beyond having a few bucks. Sustainable financial freedom enables us to reach our potential as people. This freedom has five key components. The first four are things we DO. But the last one is key, it’s the secret sauce, that allows us to STAY in financial freedom:

  1. VISION for how you want to invest your time, talents and money
    • Answers: Where am I going and for what purpose?
  2. PLAN (budget) that supports your vision and quality of life you want to maintain
    • Answers: How will I get there?
  3. DEBT-FREE approach to everything we purchase
    • Eliminates the burden of obligation and provides a sense of security
  4. A bias toward SAVING
    • Provides a safety net for future needs and unplanned emergencies
  5. An ATTITUDE of contentment with where you are, and gratitude for what you have
    • Here’s the secret sauce…let’s unpack it some more

Secret Sauce To Financial Freedom

Contentment and gratitude are the secret sauce? What do you mean? Let’s break it down: Contentment, being satisfied with what one is or has; not wanting more or anything else, generates an ease of mind that is so essential to financial freedom. Contentment eliminates the need to compare  yourself to anyone or anything else.  Contentment also brings peace and peace is a large component of freedom.

The second component of the secret sauce to financial freedom is gratitude.  Gratitude, defined as a feeling of thankfulness or appreciation,  focuses our mind on what we have instead of focusing on what we do not have.

Combined, contentment and gratitude allow us to live financially free at all stages of our financial journey. And this is the key: Financial freedom is a journey and not a destination. If done right, we can experience financial freedom at all stages of our finances because we can choose contentment and gratitude. Whether you are just starting your career and making a minimal salary, or you’re a wily career veteran and make a large salary, you can live in financial freedom if you DO the four Do’s listed: Define the goal (Set a vision), budget, eliminate debt and save. Contentment and gratitude allow us stay in balance and not stray from feeling free while at the same time building wealth which allows even more choices.

The Takeaway

Commit yourself to being content with your current situation and grateful for what you have. Combined with being disciplined to set the direction in your life (vision), living within your means (budget), eliminating the burden of debt and saving for future needs and emergencies, we can live in the moment, free to pursue our dreams without worry or anxiety. You don’t have to be rich to be financially free, but over time, with discipline, contentment and gratitude, we can have that too.

 

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The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness