What Does Financial Freedom Mean to You?

Financial freedom often means different things to different people. From being debt free, retiring early or just having enough money to quit the job you hate. I pondered on the real meaning of this question in my own life and I concluded that financial freedom would enable me to make decisions without having to think about the constraints of money.

On my quest for financial freedom, I’m forced to face the unhealthy relationship I’ve had with money for the last decade. While I was a “saver” I primarily used money to accumulate stuff….I loved to shop and I did it often. I was a shopaholic and did it without regard of my annual cumulative spend. As my income grew, so did my taste and level of spending.  Making more signaled my ability to afford more expensive things. I always felt somewhat responsible because I always had cash on hand, equivalent to an 18 month emergency fund. Whenever my credit card balance approached $5,000, I would pump the brakes on spending and "borrow" money from savings as part of the repayment process and use the rest from paychecks. I would be free from spending for a while but it would only be a matter of time before the vicious cycle took over a gain. The real truth....I employed the mindset that so many people have - "Work hard play hard", "Live for today because tomorrow isn't promised", OR "You can't take it with you so you might as well enjoy it". All these statements are true. However, if indulging in consumerism is the response to these statements, then chances are you might be spending close to what you earn if not more, accumulating debt along the way and not really investing for the future. Yep....that was me to some extent…enjoying life for the short-term without any real planning for the future. Instead, I spent the last decade blissfully satiating in the reigns of consumerism. 


I knew that spending into oblivion was the recipe for being broke and I wanted to change the future of my family tree for my son. As I explored and read extensively about financial freedom, I came across a term quite often used on the internet called FIRE (Financial Independence Retirement Early). FIRE indicates that you have enough passive income from savings and investments, which means you no longer have to work a traditional 9-5 job. If traditional retirement happens at 65, people were defying the status quo and retiring as young as 35 years old. How did they do this? They developed a non-traditional mindset towards money by keeping their expenses low, increasing their savings rates to levels as high as 75% of their income. That may feel impossible for a lot of people but imagine what the outcome would be if you created a budget, focused heavily on reducing expenses and increased your savings rate to say 40-50% of your income and invested it?

How does FIRE work?

The equation for FIRE = 25 x A (A is average annual expenses) with a 4% withdrawal method. The 4% is a rule of thumb used to determine how much should be withdrawn annually from a retirement account. Here's a simple example assuming your annual expenses are $35,000:

FIRE - 25 x $35,000 = $875,000

$875,000 x 4% = $35,000

If my annual expenses were $35,000 I would need at least $875,000 to retire, and based on average stock market returns, 4% could be withdrawn to pay annual expenses. When I plugged in my actual annual expense, I was a bit out of sorts as I coped with the sad realization of how my spending habits and poor relationship with money has derailed my ability to experience FIRE.

Where do I go from here?

2017 started and like most people, I reflected on the past and thought about what I’d like to do differently and immediately felt a strong level of guilt. The guilt surrounded how little I valued money, and the poor choices I've made collectively over the years. I realized that a healthy approach towards money isn't so much about doing simple math and deciding to just save more….I needed to change my mindset and relationship with money. Until there’s a shift in perspective, the behavior won’t change. Having a college degree, being smart in math or having a career in finance doesn't determine good money management skills. 

The first step is actually being serious about making a decision to change your financial life. If your'e single, it starts there and ends there. If you're married or have a mate, they have to agree to join the journey to financial freedom. Without their buy in, change won't be effective. It wasn't easy to get DH (Dear Husband) to admit we weren't spending wisely and that debt represented a larger seat at our table that it should. I decided change was necessary after accepting that everything I had purchased in the last 10 years produced ZERO return. That's the thing...."things" don't give returns. That reality hit home hard as I rationalized the damage of the loss of time. The loss of years and compounding interest. That was the catalyst for change. While I can't get back the time lost, I can still take full control of my future. My goal in documenting this journey to changing my relationship with money involves functioning like the CFO of my family and implementing the basic principles of money management that never change:

  • Create a Budget
  • Spend Less than you Earn
  • Reduce Debt
  • Increase your savings rate
  • Optimize investment opportunities (401K, IRA's, Brokerage Accounts etc)

This journey isn't about deviating from poor spending habits to obsessing over money because there's no satisfaction in that. Instead I'd like to challenge myself to become a better steward of my finances by optimizing every dollar earned and planning for the future. But first I want to wake up every day and acknowledge the blessing of health and strength....the source of what allows me to think, work and get through each day. In my desire to build wealth, I acknowledge that true wealth isn't the sum total of my financial net worth - but the growth I hope to experience in changing my relationship to money , shifting my focus from accumulating things to building a storehouse  of great relationships and experiences.                                                                                                                                                                                                      

What does Financial independence mean to you? Does FIRE seem like a reasonable goal?