Financial Independence, Financial Security, Investing, Podcast, Saving
January 20, 2019
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While wahoo fishing a few weeks back, Suze had a revelation. What she realized is that financial freedom can no longer be the only goal.
Suze Orman here. Now. On last week's podcast, I introduced a topic to all of you about financial independence versus financial freedom. Now I have a lot invested in this phrase financial freedom. I wrote a book in 1997 called The Nine Steps To Financial Freedom. And that book changed this world after that book hit and it hit big. Everybody started to talk about financial freedom, financial freedom, this financial freedom, that financial freedom, this financial freedom, that and now I'm like, oh my God, financial freedom is not the goal. Financial freedom actually never was the goal. The true goal needs to be financial independence. Now, how did I come up with this? How did I realize this? Well, it happened actually about two weeks ago and KT and I had just come in from fishing. We were wahoo fishing and for those of you who don't know wahoo fishing, wahoo is a huge fish. It can be anywhere from four ft long to six ft long. It can weigh 65.85 pounds, 100 pounds. And it is one of the fastest fish in the ocean and to catch it is no small feat. I will just leave it at that. If you are a wahoo fisherman, you know what I mean. It is not something that you do if you don't know what you are doing. It is extremely dangerous and requires a lot of skill. And KT and I were out there by ourselves. Two women wahoo fishing. And we're actually known on the island that we live on as the fishing girls because we out fish everybody on this island when it comes to wahoo fishing. So we had just pulled in and we were so excited because we had caught a wahoo. But this wahoo, wait, I want to say about 40 pounds. So it wasn't easy to get a 40 pound wahoo out of the hole that you put it in while you're driving and get it out and get it up on the deck and put it into it. It's, it's heavy, it's heavy. And while we're doing this, just the two of us, our little friend Giselle, who is about 10 years of age is riding by on a little golf cart with her father. And they stopped to see what we got. And now the father is saying to me, Kurt is saying to me, Suze, can we help you? I said no, we can do it ourselves. And they go wait Suze we can just lift it out of the boat for you and put it on your little golf cart and we can do it all for you. And I said no Kurt KT and I like to be independent, we can do it ourselves. We're more than capable, thank you very much. It's not about you doing it for us, it's about us being able to do it for ourselves. And then I look at Giselle this 10-year-old and I say to her, Giselle always remember to be independent. Doesn't matter if somebody else wants to do something for you or not, never ever ever lose your independence in any aspect of your life. Promise me that Giselle. And she says okay, Suze, I will. At that very moment I went, oh my God, financial independence is the goal. It's the goal. Because I know people who have financial freedom, I know people who have millions of dollars, tens of millions of dollars, hundreds of millions of dollars, even billions of dollars. Yet they don't feel financially independent. They have financial freedom. But they have advisors, and they have stock brokers and they have insurance agents, and they have managers, and they have all these people doing it for them. So they don't feel like they're financially independent because they are dependent on somebody else for paying their bills, making their decisions, doing all of that. And that lack of independence makes them feel broke. It makes them feel insecure. Remember last week we started to talk about when you're broke, you're broken because there's a disconnect, you're not connected to everything. And when somebody else is doing your money for you, you're not connected to it. So therefore that connection is broken and then you therefore feel insecure on some level. So financial freedom is not what you want. Financial independence is where you can do it all yourself, you know where your money is going, you know where your money is invested, you know how to write checks, you know how to pay your bills, you know what the interest rate of your mortgage is. You know when your house is going to be paid off, you know which retirement account is best for you, you know what you're invested in the retirement account, you know about your student loan, you know about this, you know about everything, you know about it and therefore you can make independent decisions about it. And those decisions are the decisions that make you feel powerful because now you are connected with your money and when you are connected with your money and you know what to do with your money, of course financial independence means that your money starts to grow and things start to go great. But you never feel insecure and the goal of money is for you to feel secure. And if all you have is financial freedom, and financial freedom is that because you have a lot of money and you don't have to worry about that. But yet you don't know anything about your money, you feel insecure. So that's not freedom. You know, that's not the goal. So do you understand the goal now is for you to be financially independent for you to make your own financial decisions and not be dependent upon others? That doesn't mean that you don't take others advice or that you don't ask or that you don't have people doing this or that for you. It's just that you could do it on your own if you wanted to. And that's what happens when you go wahoo fishing. So apparently all the big ideas come when you're going wahoo fishing. Well, you know why not? Right? So, but I sure had fun that day. Well you seem to always have fun when you're fishing. But let me ask you this because I kind of feel like are you throwing financial freedom um with the baby out with the bathwater, is this no longer my goal? What what am I supposed to think about this? You're freaking me out a little. So listen, we can create a brand new movement, we can call it the FIFF movement F-I-F-F, financial independence and financial freedom. No, I am not throwing financial freedom out. But you want to have financial freedom. You know, Sarah, you want to be able to be in a situation that you, you know you have enough money so that if you're in a relationship that you don't want to stay in, you can leave, you can leave a job, you can do all those things that you want or possibly retire for good one day. But financial freedom isn't enough. It is also the goal. But with financial freedom without financial independence, you're really insecure. Financial independence though. Without financial freedom, you really don't get the things that you need in life or want in life. So you need both. You always will. And I have to tell you though, I didn't know that until I went wahoo fishing. Well thank goodness you picked up this sport. So let me, let's just let's just do something really quickly. I just want to ask one more time. So freedom. This is about meaning I'm free to do whatever I want because I have enough money to do? So I can quit my job if I have a bad job it's and then and then what's, how does independent slice into that? It gives me what? It gives you security. So you may be financially free or you may not be financially free, but you always need to be financially independent. And financial independence, especially for people who are in a relationship, forget about if you have a whole lot of money and you have all the staff and everybody around you that's doing everything for you. Let's just bring it down to. One on one. You're in a relationship like you are Sarah and yet you don't know anything about your money. You have money, you're able to pay the bills, but you know, you have a retirement account but you don't know what kind of retirement account you have. You know you have a mortgage but you don't know how long of a mortgage is it? 15 years, if it’s 30 is it fixed? Is it adjustable? What is your interest rate? How many years do you have left on it? Oh you have money but you don't know really how much money you have, you know things but you don't. So financial independence is when you know every single thing about your money, about your assets, about your debt, about your retirement accounts, about your insurance policies, about everything. So that if everything around you all of a sudden disappears, there goes Kevin, there goes everybody Sarah, you know what to do because you are financially independent. Did that make sense? I am now officially picking up what you're putting down. Alright, so then do you understand the point that I'm trying to make here? Yeah, it definitely rings very true for me when I started to think about it, I thought of two major examples. The first one was my own financial independence. My own experience in a relationship actually with my husband before we were married and we were just dating and I let him invest the money for me. And I didn't ask any questions. And guess what? I lost it all and I was angry but I was more angry at myself, how could I have done this and what it did was lit the fire under my ass to start understanding my money better. And that was kind of my big wake up call to create a relationship with my money. But it also made me think about you and it made me think about you and The Buttercup Bakery and how you losing this $50,000, which you felt wasn't your own money by investing it with somebody at Merrill Lynch, I mean you became not just Suze Orman but Suzy Orman like that was like the beginning, you know what I mean? Like that was the thing that was the fire under your ass that just said uh this isn't how this goes down for me. So what's interesting about that is that does somebody, does somebody have to lose their money or have something negative happen to them before they desire, before they have a true desire to become financially independent? We all have this dream to become financially free. And there were many people who had tremendous financial freedom and then gave all their money to Bernie Madoff and now they are paupers. So, so what does it take? What does Sarah, that's the question, I don't know. I mean, Suze, don't you think that that's true and anything in your life, something happens to you, your parent gets sick and then you're like, oh I need, wait, do you have your finances? Your will, do you have a trust, what do you need? And you start asking questions that you never even thought to ask before. But what's interesting is that that's why I want this show to make a difference. I don't want you to have to learn the hard way to suffer a loss, to suffer a mistake, to suffer an illness, to suffer, not have the papers or the money or to trust somebody that you shouldn't have trusted when you all have what it takes to do this yourself. Again, it's not that you can't ask for help, but you need to know is the person who's giving you the help. Do they have your best interest at heart? Or do they have their best interest at heart? And that's what people need to know. So, financial independence has to come from this desire of you wanting to be independent. You wanting to be a woman who knows how to do things on her own. I don't even know how to teach KT. That I have to tell you. KT drives me crazy. She drives me absolutely crazy when anything is electronics. She doesn't want to know how to do it. Suze. Turn on this, Suze, do this, Susie do that. And I'm like, if anything happens to me, KT isn't going to know how to turn on a damn television set. Well, I'll come and help her. She's just gonna be sitting there and I'm like, are you crazy? So it's also important. This is important, Sarah that I stopped turning on the TV set for KT. That I stopped doing those things for KT and force her to be independent of me with the little things that she just has no desire in learning. Now she's independent with her money. But she's not independent with driving a boat, starting the boat, starting televisions, the printers, the wifi in the house. So independence has to be a desire that you want. Are you listening to me? It has to be a desire that you want from within. Don't be dependent on others. Listen, I I was like oh goodness, I can't even, I can't even start asking for questions. Sarah, listen, I think you've learned a lot from wahoo fishing, from KT not being able to turn on the television. So right now we want to know what our friends that are listening have questions about. Does this make sense to you? Do you understand the difference between being financially independent and financially free? So with that I want you to email us or call us. You can email us at email@example.com. Suze. How do you spell your name? S-U-Z-E. That's your next question to me. It's like why the hell do you spell your name like that? Why couldn't you be just something normal like S-U-S-I-E? My original name was Susan you know. But again I already told you there's nothing about me that is ordinary. Or you can leave us on the S-U-Z-E voicemail. People you can leave us a voicemail at 877-545-SUZE. Again. 877-545-SUZE. Or email us at firstname.lastname@example.org. And on Thursday we are going to get into it. Alright, everybody take care.
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Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.
Credit & Debt, Saving, Investing, Retirement