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You Are Here: Home - Newsletters - "Get Organized" - Article
FINANCIAL FREEDOM -- how many of us actually stand any chance of achieving this goal? Financial independence is well within our grasp -- we just have to make a few fundamental shifts in the way we view money and material possessions -- and in the way we choose between instant gratification and future security.
UNDERSTAND WHAT FINANCIAL FREEDOM REALLY MEANS
What do you think of when you imagine being financially INDEPENDENT? Living on an island in the South Pacific in the lap of luxury? Financial freedom has less to do with wealth and more to do with liberty from MONETARY WORRIES. Someone who earns $10,000 a year can be more secure than a person who earns 30 times that.
MY VIEW
Imagine having no DEBT -- you live within your means, you have a healthy nest egg stashed away for emergencies, you live in a reasonably-sized home that is paid off and inexpensive to maintain. You receive at regular INCOME from your investments and are FRUGAL and deliberate with all of your spending decisions. And you don�t have to WORK if you don�t want to -- at least not full time. You have plenty of time to pursue other interests without feeling the pressure to "pay the bills."
THE REAL WORLD
Sound like a pipe dream? It�s a heck of a lot more realistic than the idea of retiring as Bill Gates to an island! And a lot of people are shifting to this philosophy of VOLUNTARY SIMPLICITY in an attempt to escape their financial burdens.
CHANGE YOUR ATTITUDE ABOUT MONEY
The first obstacle to financial freedom is the way we view money. We tend to define ourselves by what we make and what we own. At the same time, DEBT has become commonplace, almost a badge of honor. People talk about their financial liabilities in the same way that they talk about their 80-hour work week -- with a kind of sheepish PRIDE. But the ideas of simplifying, cutting back, and stepping out of the rat race makes some people UNCOMFORTABLE, as if this is a traitorous way of life.
GETTING HEALTHY
The only way to overcome our taboos about money is to understand that money is nothing more than a means to an end. Money is only valuable in terms of the NON-MATERIAL things it can buy you -- unfettered time, security, the freedom to really enjoy your life and the people around you. Money has no qualities beyond the purpose for which we use it -- it is simply a TOOL.
RE-EVALUATE YOUR SPENDING PRIORITIES
Look honestly at the things you own, the bills you pay, the debt you incur. Are your spending habits in alignment with your VALUES? Let�s say you claim that spending time with your children is a priority. But you spend lots of money on "stuff" -- and subsequently feel that you HAVE to work 70 or 80 hours a week to "pay the bills" -- and you rarely see your kids. In hindsight, are these wise spending decisions?
MAKING THE SHIFT
Achieving financial independence is all about making value-based spending decisions PROACTIVELY, before you regret having gone the wrong way. It requires avoiding impulsive spending and making CONSCIOUS decisions about how to invest your precious resources. And you really have to view money as more than cash �-- you need to see it in terms of the time and energy it takes to earn it.
PLUG YOUR SPENDING LEAKS
Think about all the "stuff" you buy everyday without really paying attention -- snacks at the machine, a magazine at the gas station, that cup of coffee on your way to work. And don�t forget about the expenses you are racking up because of financial DISORGANIZATION -- interest charges, late fees, etc. All of these fall into the category of UNCONSCIOUS spending. You just do it because it�s a habit -- and it can really add up.
WHERE DOES YOUR MONEY GO
What�s your VICE -- eating out when you are feeling lazy? Buying every new magazine that comes out? Procrastinating on paying your utility bills? If it�s a drain on your finances without providing you with any tangible BENEFIT, do your best to eliminate it. For "spending leaks" that give you pleasure, decide how often you can afford to indulge and still reach your other financial goals. Also look for unnecessary CONVENIENCE EXPENSES -- things that we spend money on because we are overwhelmed, too busy, or just worn out. Perhaps by re-evaluating how you use your time, you might discover that many of these expenses are symptoms of misplaced priorities.
SPEND LESS THAN YOU EARN
It�s amazing how many of us fail to stick to this basic principle. I partly blame our culture of INSTANT gratification -- as a society, we are nearly incapable of sacrificing in the present for a benefit in the future. You have to ask how each purchase improves your quality of life -- or actively detracts from it. We are continually pushed by marketers, the media, and society to spend more than we can really afford -- and on things we didn't know we needed. But this trap can easily be avoided if we choose to live within our current means rather than counting on future earnings to pay off our debts.
PAY YOUR DEBTS -- NOW!
Your first priority should be to become DEBT FREE. While you might earn as much as 10-15% on your investments, many loans and credit cards carry much higher interest fees. Suspend your investments, top putting away money in savings, just temporarily, and focus all of your financial energies on your debts. Plan to knock out the HIGHEST INTEREST debt first, then move to the next highest and the next, until you have cleared them all out.
USE CREDIT CARDS JUDICIOUSLY
Why do people take out loans or use credit cards -- if not to buy things that they can�t afford at the present time? If you can commit to paying off a debt after the purchase -- plus interest -- why can�t you commit to SAVING the money ahead of time? Your purchase will cost less in the long run. Credit cards can be a terrific way to consolidate your purchases, simplify bill-paying, keep track of your expenses, and build GOOD CREDIT. But you have to pay your entire balance off each month -- otherwise you are simply flushing money down the toilet on interest charges.
REDUCE YOUR MONTHLY EXPENSES
In order to really trim the fat from your budget, take a hard look at those expenses you�ve always thought were UNCHANGEABLE. If you had to make a choice between the house and not having to work 80 hours a week, which would be more important to you? Can you get by on with one car? Would your vacations be just as good if you flew coach? We get accustomed to demanding the very best because we feel that we DESERVE to be pampered after all of our hard work. But if we didn�t pamper ourselves so much, we might not have to work so hard in the first place.
SET UP AN EMERGENCY ACCOUNT
What kinds of expenses tend to throw off our budgets and cause us to rack up unwanted credit card debt? The UNEXPECTED kind -- car repairs, medical bills, or other expense creep up on you when you didn�t have any cash on hand. The solution is easy -- set up an emergency savings account to cover you when disaster strikes. You should put away at least 6 MONTHS worth of income so you have something to fall back on. Just start taking the money you were putting toward credit cards and loans and begin socking it away in the bank. And remember, this money is only for EMERGENCIES -- set up a separate savings account for purchases.
DEVELOP THE INVESTING HABIT
The final step is to really put money away for your future. Invest REGULARLY -- putting a set amount of money aside each month for your future. Plan instead to invest for the long-run. Remember that over the last 75 years, the stock market has seen an average gain of 10% per year -- when you look at the big picture. And DIVERSIFY. By spreading your money around you will protect yourself against major losses down the road.
Copyright 2000-2009 Ramona Creel -- you are welcome to reprint any article, but you MUST include this resource box. Would you like to reprint this article in your publication -- or distribute it to a wider audience? Click here for reprinting instructions. Want to receive these kind of articles via e-mail each month? Sign up for a free newsletter subscription. Click here to return to "Get Organized" -- April 2001... Add this page to your Bookmarks!
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