Monday, January 15, 2018
What is Financial Independence?
One of the pillars of our society is independence. We all want to be independent and have no reliance on anyone else. We all wish to be free to do what we wish and not have to answer to a higher authority. Financial Independence is a completely different ball game, however. When it comes to our money, we have a lot of people to answer to. Bills, bosses, family all get in the way of our financial independence, and I mean that in the most loving way possible regarding family. How do we find that balance of doing what we have to do and doing what we want to do? This week I am going to delve deeper into Financial Independence and find some solutions to this difficult issue. My focus today will be to give my definition of Financial Independence and challenge you to come up with your own. It is a worthwhile pursuit so let’s get started on that path.
No more day to day
Letting go of the day to day worries is priceless. While you will never completely let go of your day to day worries, you can get to a point where they do not influence your life financially anymore. I will use my life as an example, mainly because it is the life I know best. I remember very vividly what it felt like to worry about my rent that was due last month. Yes, I was often very, very late on my bills. The third notice was when I started to pay attention, bad I know. For many Canadians, how the bills will be paid by the end of the month is a constant worry. Every dollar is needed just to keep the lights on and that can be scary. Another worry I used to have was if I got sick. Having health problems was terrifying for me financially because I could barely keep up as it was, working full time. If I had to miss work due to illness I would have been euchred. How did these concerns go away for me? The truth is that they didn’t go away, they just changed into different worries. I no longer worry about how the bills will be paid every month. I instead worry what funds I will use, my income or worst-case scenario, my savings. For me, the path to FI is a ladder you must climb, and I got myself to the second rung. There are many more rungs, but not worrying about the day to day is a huge first step.
About half of Canadian workers living paycheque to paycheque: survey – Glove and Mail
Control over expenses
I don’t know if it is a good or bad thing that I can say, within a few bucks, where each of my credit cards and bank accounts are at. Some may find it disturbing, but I find it liberating in a sense. It took me a while, but I finally gained control over my spending. I find this to be a key piece of financial independence because it is only through disciplined spending that you can have all you want in life. Having knowledge of where every dollar is going and what the purpose is, becomes part of your life. You wouldn’t believe how many times I have walked into a store and then left empty handed because I have talked myself out of buying some nonsense. Because I try my best not to waste my money on crap, I can very easily understand where all my accounts are at. It is when you waste money on useless stuff that balances are a surprise to you, especially credit card balances. This aspect of FI is crucial in my humble opinion and will be the defining part of your relationship with money.
9 Tips for Maintaining a Positive Cash Flow – Budget Boss
Work because you want to, not because you have to
This part of FI is probably the trickiest one. We all need money coming in to survive and the majority of us do jobs that we don’t necessarily enjoy to make that money. One day, my goal is to be able to do the work I truly enjoy so that I can eliminate the work I don’t enjoy at all. This can only be gained through financial independence. It is a fear of not being able to pay your bills that forces us to work jobs we don’t like. It is this fear that forces us to put up with terrible bosses, annoying co-workers, and un-grateful companies, just so we can get by. This portion of financial independence is the most beautiful part to me because I feel that if I am working in a job I love, I may never retire. Being able to take as many vacation days as you like, work as much as or little as you like, and answer to no one is a beautiful thing. When your job needs you more than you need them, you have made it. I want to get there.
The New Rules for Early Retirement – Time
Retirement doesn’t scare you
Do you know how much money you need to retire? Do you know what your living expenses will be when you are retired? Do you know how much money you will have every year when you are retired? I remember back in the day when bills came in that were overdue, I wouldn’t open the bill. I didn’t want to see what it said, mainly because I wasn’t prepared to deal with it. Many people treat their retirement the same way. They change the subject or deflect when the topic comes up. It is always too far away to think about, or not as important as what is going on right now. Going back to point number one, when you let go of worrying about the day to day, you can focus on what is really important, like your future. One of the last rungs of the ladder of financial independence is understanding retirement. It doesn’t scare you because you know what it will look like. It doesn’t scare you because you have a plan in place that you are working on. It doesn’t scare you because you know you will retire one day on your terms. That could mean calling it quits, or focusing on what you love to do instead of what you have to do.
Those four points are what financial independence means to me. There are many other aspects to FI that are equally important, but for me, nailing down those would be a dream come true. Again, it is all a process. Each rung of the ladder gets you one step closer. The tougher parts of FI take much more time but can only be accomplished when you nail down the easier ones. FI is all about mentality. If you make that your goal, everything else in your life will seem less important. I am a true believer that the better you are with money, the better you are at life in general.
Thanks for tuning in as we begin FIRE Week here at Budget Boss. Don’t forget to tune in tomorrow as I discuss frugality in respects to FI. If you would like to share your ideas on FI, please do not hesitate to message me at joe@budgetboss.ca. Have a great week Bosses!
“True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made.” – Franklin D. Roosevelt
Email – joe@budgetboss.ca
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