I’m a high school English teacher. My husband is a landscape architect who estimates and wins bids for multimillion dollar projects in New York City. I don’t consider myself a numbers person, yet I am the one in charge of finances at home. We live comfortably and don’t stress too much about money. In fact, I’m home on an extended unpaid maternity leave right now because I have prioritized financial freedom since I was a teenager.
I write to you about financial freedom not from the point of view of an accountant or a financial planner, but from that of an ordinary person who has achieved financial freedom and wants to share her experience with you so that you, too, can free yourself from income anxieties.
Behaviors of the Financially Free:
- Spend within your means.
- Think long-term when making choices.
- Set goals.
- Do “You” – not “The Joneses.”
- Seek advice.
Although each of these guidelines may seem like common knowledge, it is actually the combination of these five behaviors that leads to financial freedom.
Spending within one’s means is a solid first step to financial freedom.
High credit card limits and huge mortgages are readily available, but it is wise to avoid maxing yourself out. Think about it: How can we be comfortable in the case of an emergency or an expensive surprise if every penny we earn is already earmarked for paying bills? Similarly, when purchasing a home, you might look for an overall price that fits your budget, but if you don’t consider the taxes (and the fact that they will most likely go up in the future), you may be getting in over your head. According to Forbes, you should not spend more than 28% of your income on a mortgage, and if you can spend less that’s even better. But how do you turn down that offer for so much money from a lender? Easy, do your calculations in advance and then tell the bank how much you’d like the loan for. Rather than letting a mortgage broker tempt you with an amount that might become a financial strain, set out to spend only a certain amount from the start. The same goes for any large purchase, from a new car to your wedding gown. If your big day budget affords you $1,000 for the white dress, then don’t look at anything above your price point. There will be plenty of options for that or any budget – trust me!
I have my parents to thank for teaching me to spend within my means, starting with my very first credit card. As a teenager, I worked part-time at a pizzeria, and whenever I purchased something with my credit card, my mother would have me take the receipt and put that amount of cash in an envelope. Before each month’s bill was due, I’d deposit the cash and pay off the balance. This physical movement of money teaches that credit cards are not magic sources of money; they just make it so you fumble a little less with your wallet at the register. And by having a job of my own, I enjoyed financial freedom that several of my friends did not have as teenagers. While they were asking mom and dad for money to go to the mall, I knew how much my monthly income was and could do with it what I pleased.
The next step to financial freedom is thinking long-term when making choices, both large and small.
When we suffer from myopia, we get caught up in day-to-day minutiae that can really strain our wallets. Whether it’s planning a week’s worth of meals instead of waiting until you’re starving and ordering take out or considering which career path makes the most sense for your future financial security, having a plan is so beneficial. Author of “How Do I Achieve Financial Freedom?” Chris Hogan suggests that in order to secure financial freedom you should ask yourself where you want to be in 10 years. By reflecting on your life plan, you allow yourself to see the bigger picture, thus inspiring intrinsic motivation to make decisions that promote your financial wellbeing.
The teacher in me is a “planner.” By thinking long-term, I’m willing to work a little harder and save a little more up front in order to enjoy the fruits of my labor down the road. For instance, instead of buying designer shoes and handbags with my new teacher salary in my early 20s, I paid my way through grad school which increased my annual salary and afforded me more career opportunities for the future. My philosophy has always been, I’ll work as much as I can (without sacrificing quality of life) while I’m young, so that I can relax a bit more as I get older. My current situation is a great example of this paying off: Saving enough money to be able to stay home with my daughter for 15 months without having to worry about paying the bills has brought me incredible joy.
This type of planning and thinking long-term lends itself to the next step: goal-setting.
Setting goals is so important when it comes to achieving financial freedom. When you set goals, you see attainable progress and success; in turn, this further motivates you. The Mind Tools content team writes:
By setting sharp, clearly defined goals, you can measure and take pride in the achievement of those goals, and you’ll see forward progress in what might previously have seemed a long pointless grind. You will also raise your self-confidence, as you recognize your own ability and competence in achieving the goals that you’ve set.
Have you ever felt satisfaction from crossing an item off a to-do list? Achieving a financial goal feels even better!
In addition to my big financial goals like building a nest egg, starting a college savings fund for my daughter, and saving for retirement, I like to set smaller financial goals, as well. The feeling of accomplishment when we’ve saved enough to tackle our next backyard project is incredible. But how do we manage to save for so many different things? Our steady, salaried income goes towards bills, living expenses, and our “big” savings goals, while other sources of income fund our smaller goals. I have to admit, my husband and I are always open to a little “hustle” – I worked at a pizzeria in high school; I was a ski instructor, note-taker, and babysitter in college; I waitressed and did banquets over the summers; I tutor, proctor SATs, and publish my community magazine, among other things now. I’ve never had to work hard to find jobs like these because I always stay open to new opportunities. I like work that affords me flexibility to spend as much time with my family and friends as I desire, but that’s also fun and fulfilling. By putting aside our “fun money” for small goals like DIY home renovation projects, we are able to maintain and grow our regular savings from our primary sources of income.
An often overlooked step to financial freedom is “Do YOU.”
Instead of taking on the sisyphean task of trying to keep up with the Joneses, focusing on what makes you and your family safe, comfortable, and happy is all that’s really important. Of course you should splurge on something fun or fancy at times, but it should be an investment in you and/or your family – not something that will merely impress the neighbors. Don’t buy into the importance of this step? Check out the Money article titled: “Why You Should Never Try to Keep Up With the Joneses.”
When we purchased our home, several people expressed their concerns that we didn’t have an in suite master bath. Our bedrooms were a little small for their taste. Wouldn’t we prefer to live somewhere that could get us more house for less money? But instead of worrying about fulfilling other people’s expectations, we focused on our own priorities: a great living space, a welcoming community, and mid-century modern character. By staying true to our own wants and needs, we found the perfect house and had money left to transform it into our dream home. Of course there are still some projects on our to-do list, but in the meantime our Formica countertops are doing their job just fine.
Get financial advice when you need it.
Talking money is taboo, I know. But don’t discount this last step – and don’t be shy. We aren’t afraid to ask for help or seek training when it comes to other life skills, so why should learning about handling money be any different? Of course it’s a good idea to consider time and place when having conversations about money – maybe avoid it in the middle of a holiday meal – but there is no reason to avoid the topic entirely. In fact, it’s important for people to discuss finances and to ask questions that can help them secure a strong financial future. A quick Google search yields many sources that agree, including articles such as Business Insider’s “Why You Should Talk About Money,” NBC News’s “Why Talking About Money Helps You Hold Onto It,” and Bustle’s “5 Reasons Why Women Should Talk About Money More,” among others. Knowledge is power, so start talking – and learning – about your money.
I’ll admit, I wasn’t born with an aptitude for figures, so by seeking advice from a wise uncle (who is a former Certified Financial Planner) and picking the brain of my accountant friends and colleagues, I attained the basic knowledge I needed for a strong foundation for financial freedom. And when I didn’t trust myself to make the call whether we could afford for me to stay home with the baby for longer than the 12 week FMLA period, I hired an expert to double-check our finances. As my life situation changes and evolves (husband, mortgage, baby…) I continue to seek counsel and teach myself what I need to know so I can carry on being financially free.
Putting it all together.
You may find that you do one or more of these steps already, yet you don’t feel the financial freedom you desire. That’s because it takes the combination of all five steps to attain a well-rounded approach to finance. It may take some refocusing and discipline, but living by these five basic principles can help anyone achieve financial freedom.