Reaching Financial Independence is a Declaration for All to Embrace
Let’s be historical with a side of overly dramatic for a moment, shall we?
The Declaration of Independence was issued on July 4th, 1776. It had taken a long time for things to reach the point that such drastic measures seemed necessary, and no one was entirely sure what would happen once the Declaration was proclaimed.
America didn’t win the resulting Revolutionary War until the Battle of Yorktown in 1781. The treaty formalizing independence from Great Britain wasn’t signed until September of 1783. Many historians argue that this new “United States” didn’t really prove itself until its subsequent victory in the War of 1812.
There was a very real chance it would all fall apart during the Nullification Crisis of 1832. And you may have heard of a little kerfuffle in which half the country tried to completely separate from the other half in 1861. That wasn’t resolved until 1865, at which point something like 620,000 Americans had died trying to sort it out. Black Americans weren’t legally independent until the 13th Amendment. Women had to wait another half-century until the 19th Amendment.
The U.S. wasn’t considered a major world power until World War I. It wasn’t until after World War II we became one of only two “super-powers” left on the globe. We could have a spirited discussion about where things stand in 2020, but that’s probably not necessary in this particular forum, or necessary for making my point.
“Which is what?” you no doubt began asking several paragraphs ago.
What Is Financial Independence And How to Reach It
Declaring independence is a beginning, not a conclusion. Like starting a new country, moving out of your parents’ house, leaving a bad relationship, or beginning a new job in a new state with a new circle of friends, a “declaration” of financial independence is an important way to reboot and refocus.
It’s what you do with it moving forward that truly determined whether or not the day will be marked with fireworks and brats down the road. It doesn’t just take time to REACH your long term financial goals; it takes time to even plan them out and figure out HOW you’re going to get there.
Declaring Financial Independence From…?
The American colonies knew exactly who they were declaring independence from, and why. Although the most memorable parts of the Declaration of Independence are the bits about:
we hold these truths to be self-evident
and
we pledge our lives, our fortunes, and our sacred honor,
, the bulk of the document was devoted to listing specific grievances with the King of England.
He has forced…,
he has refused…,
pepper the text throughout. (I may be paraphrasing a bit.)
From whom or what might it be time for you to declare YOUR financial independence?
Relying on Family and Friends
Do you find yourself regularly hitting up mom for some cash to get you through to the end of the month? Are you the guy whose buddies always have to pick up the tab when you go out to celebrate something? Have you noticed your in-laws avoiding you or sounding annoyed because you never seem to be able to pay them back for this or that?
Leaning on loved ones doesn’t make you a bad person, but it often has an eroding effect on those relationships. It’s impossible to remain on equal terms with anyone if they’re always the provider and you’re always the provided-for. Declare your financial independence from family and friends before they declare it for you.
Credit Cards and Other Debt
Has payday become almost something you dread because you know it means having to sit down with your bills and figure out who gets partially paid this month and who doesn’t? All that spending seemed like so much fun when you were buying stuff at the mall or ordering it online or buying that round of drinks. Or maybe some of it came about less pleasantly – those medical bills you couldn’t have anticipated, or that repair you hadn’t planned on needing for another year or two.
Now it’s overwhelming and you’re not sure what you can do about it. Most months you tread enough water to keep going, but it sure doesn’t feel like you’re making any progress. You pay and pay and pay, but the balances seem to stay the same – or get higher! Declare your financial independence from overwhelming debt from credit cards and everything else.
Utilities, Subscriptions, and What Is THAT Charge?!
In many ways, we live in the most convenient and comfortable age mankind has ever known. Sure, there are plenty of sources of stress and we haven’t exactly eliminated strife or suffering, but we have indoor plumbing and cable and social media and music and air conditioning and trash pickup and automobiles and movies and pizza delivery and the internet and OMG THE DISTRACTIONS!!!
Cancel the Unnecessary
None of these things are inherently bad, but they do tend to muddle the budget a bit. The first time you sit down to compute your monthly income and total spending, you probably discovered that you actually have no idea where about a third or more of your cash goes every month. You may have laid out an impressively detailed budget only to realize a week later that you’d forgotten about those digital subscriptions or that streaming service, or you could have sworn your cell phone bill was much lower than that.
For me, the most maddening thing is when I notice credit card charges that I probably approved at some point but have no idea what they are. I search the internet for the company’s name or try online maps with the address trying to figure out what’s there I may have visited. I have a subscription to an online magazine from some other country that to this day I can’t figure out how to reach or unsubscribe from. It’s wasteful and honestly, it makes me feel a bit stupid.
You don’t necessarily have to cancel your Netflix or go back to a flip phone or heat your soup over a small fire to avoid using gas or electricity, but you’d be surprised how much you can save if you take a few hours each month for several months to eliminate stuff you’re not using much anyway.
If you’re logging into that service or using that much data or going to that gym, great! If not, declare your financial independence from subscriptions and memberships you don’t need. If you really need your apartment to be at precisely 74 degrees year-round, even while you’re at work or out of town, or for every shower to be 20 minutes of burning steam, that’s your call. If not,
Declare your financial independence from wastefulness with your basic utilities. It’s not all that hard; it merely requires some focus and commitment.
Bad Spending Habits
This subject can get emotional. No one’s telling you what you can or can’t do with your money. It’s YOUR money. But I would respectfully suggest that many of us could do a much better job being aware of where our money goes. I encourage you to be intentional about your spending choices instead of just kinda going with the flow and hoping for the best.
Create a Budget
This is where an accurate budget can be so very effective. By tracking your spending realistically for even a few months, you quickly learn where you need to put more of your focus and where you’re carelessly sacrificing stuff you actually care about for things you don’t particularly mean to devote so much of your hard-earned cash towards.
You’re probably familiar by now with the example of the daily $8 coffee compared to the approximate 27 cents it costs to make yourself a cup at home. Now, if you really enjoy that $8 coffee and it’s something you’ve decided is important to you, that’s fine – put it in the budget. Like I said, no one here is telling you HOW to spend your money. If you find that you’re somehow uncomfortable with doing the math on that daily coffee, however, then you have a problem. Sometimes we think something is worth what we’re paying for it, when really it’s just that we WANT it and have learned NOT to think about what we’re paying for it.
This is true in many ways beyond the issue of financial independence as well, but we’re not going there right now.
Keep Track of Your Spending
How many little things are there in your week that you don’t think you value, but which manage to suck away ten dollars, twenty dollars, a hundred dollars a month? You won’t know until you do the math and add them to the spreadsheet. Declare your financial independence from careless or thoughtless spending. Spend your money on whatever you choose, but CHOOSE – don’t just DO.
Our Own Ignorance
Whoa there, Tiger, no one’s saying you’re “ignorant” – at least not in the way you may assume. “Ignorance” isn’t the same as “stupidity.” It merely suggests that there are things you do not know. ALL of us are ignorant about many things. I, for example, am horrible at identifying dog or cat breeds. I recognize German Shepherds, English Bulldogs, and those little… you know, the yappy ones with the fur. I’m almost 100% accurate when it comes to cats – as in, “Hey, that’s a cat!” Beyond that…
People find this appalling, but it’s just never been that important to me. I’m capable of learning about specific dogs or cats, but I’ve never had a job or taken a class that required me to recognize on sight the difference between a Border Collie and a Bernese Mountain Dog.
And yes, I looked both of those up just now. Otherwise, I’d have had no idea how to even finish that sentence.
Don’t Be Ignorant. Know Your Finances.
The Goalry Mall Is Here for You.
Know Your Finances
When it comes to establishing and maintaining financial independence, sometimes our own ignorance can be something of a snare. If you don’t understand how “minimum monthly payments” for your credit cards work, for example, you could end up paying on that particular debt for decades without gaining any ground and wondering how this could possibly be. If you aren’t familiar with the different types of mortgages, you could end up spending thousands more for your home than necessary, or finding your monthly house payment going up or down throughout the year without knowing exactly why.
We’ve made financial education a key element of everything we do at Goalry. We have this crazy idea that if you’re given information and opportunity, you’re perfectly capable of deciding what’s best for you. Declare your financial independence from your own lack of knowledge. Give yourself some credit for how much you can master with a little reading and asking the right questions.
OK, But What About My Financial Goals?
You’re right. It’s not enough, of course, to know what we’re declaring financial independence FROM. We need a direction forward. A plan. Our own personal and professional financial goals.
I highly recommend laying out some short-term, medium-range, and long-term goals for your financial circumstances. It’s awesome if you want to be completely out of debt and own a second vacation home by 2050, but you should probably lay out a few steps along the way which will help move you towards that end. Goals of any time frame should be SMART – Specific, Measurable, Attainable, Relevant and Time-Based.
General Goal: I want to get out of debt and have more money to do cool stuff, because… financial independence! (This is not specific or measurable, and there’s no time frame.)
General Goal: I want to be a billionaire so freakin’ bad so chicks will dig me. (This is probably not attainable or entirely relevant to the rest of your world.)
SMART Goal: I want to free up at least $50 a month from my current spending to devote to debt elimination using the “snowball” method.
SMART Goal: I want to save $2,500 by our tenth wedding anniversary so we can take that cruise we keep talking about. That means setting aside at least $500 every six months between now and then in a separate savings account.
Debt vs. Savings (And Other Priorities)
Once you’ve declared financial independence and set your sights on using your resources more effectively and efficiently, you may discover a dilemma you hadn’t really consciously considered before. Is it best to focus on paying down debt before looking too far ahead? Or maybe I should start by building up some savings – at least an emergency fund? But I know that HAVING money doesn’t lead to happiness so much as USING that money to help the people we love and build experiences with them does. Maybe I should prioritize DOING stuff?
There’s no single easy answer to this one, but don’t get frustrated. Keep in mind that while it’s important to have specific long-term goals, you’re already doing one of the most important things possible when it comes to the more efficient management of your finances – you’re being intentional. You’re thinking about it, and making tough choices, and having a plan. Maybe you decide to do 40/40/20 – put 40% of your monthly surplus into savings, use 40% to pay off debt more quickly, and reserve 20% for family time or date night. Maybe you do thirds. It’s entirely up to you. And finally, when it comes to saving money, opening a savings account is one of the best options. We suggest you take a look at the various options below and choose the one that works best for you:
Cut yourself some slack. You probably didn’t know exactly what kind of adult you could be when you first moved out of your parents’ home. You may have changed a great deal from the time you started college until you graduated. The point is that you’re on the right track – you’ll figure it out.
Retirement Goals
It’s impossible to talk about financial independence without considering retirement. Most of us at some point had a meeting with or sat in a presentation by someone from human resources or payroll or whatever outside financial organization your employer coordinates with for such things. Take some time to revisit your options through your employer. Go through whatever paperwork they sent you home with and write down any questions you have.
Look at your various options, keeping in mind that some might travel with you while others go away if you leave that employer. Don’t be afraid to schedule a sit-down with HR or that rep from the financial company and ask your questions. Keep in mind that you don’t have to limit your options to those provided through your workplace. This is the 21st century – you can invest all by yourself if you so choose.
Conclusion
Don’t be intimidated by the idea of declaring your financial independence. Like any other kind of step into greater personal responsibility, you may feel a bit uncertain at first. You’ll probably make some mistakes along the way. But you WILL get better at it, as long as you remain determined and keep pushing forward.
It won’t always be easy, but it’s not as hard as it might seem. If we can help, let us know.