I hope you have a fantastic July 4th, and that it includes some time to reflect on the principles of our democracy that are celebrated on this holiday. We have so much to be grateful for.
This time of year has me thinking a lot about another right I believe is unalienable: financial freedom. That does not mean having no debt. Or being mega wealthy. Rather, it is knowing you have the strength and knowledge to make smart decisions in how you spend and save your money. Financial independence is when you are in control of your destiny.
Yet I know that often it’s not how many of you feel. More than half of employees in a recent national survey report they are stressed about some aspect of their financial life. The 53 percent reporting stress is actually higher than the 45 percent in 2015. That’s somewhat surprising given that the economy—and retirement accounts—have been doing well the past two years.
But you and I know that it’s what goes on inside your own household that matters most, and there are all sorts of stressors that come into play. Worrying won’t fix a thing. Doing will. Don’t say you can’t. Make this month the month you start toward your personal financial independence by adding one new behavior or action that will help you move closer to financial freedom.
The stress point: Fear of a big unexpected expense.
Action: Set up an automatic monthly deposit into a savings fund. If you have a bank or credit union checking account, it is easy to open a free savings account, and have deposits automatically made every month. Don’t tell yourself you can’t afford it. Remind yourself you can’t afford NOT to do this. Every month you deposit $25 or $50 or $100 in an emergency savings fund puts you an amazing step closer to being in control of your financial life.
The stress point: juggling giving the kids everything they want.
Action: Say no out of love, rather than saying yes out of fear. What your kids deserve most is a financially secure household. Period. Sure, they are going to nudge you and guilt you that they need another pair of jeans/sneakers or the latest tech upgrade. That’s their job! But without guilt, and especially without anger, teach your children about needs vs. wants. And explain that you are not simply saying no to them…the money you aren’t spending on their wants is money that is building your family’s financial freedom. Be specific: We are building an emergency fund. I am paying off our credit card balance. I want to save for a down payment so we can buy a home.
The stress point: Being able to afford to retire.
Action: Live below your means, but within your needs. Okay, this one might take some time to incorporate into your life, but it is so worth the effort. When you live below your means you will always have money you can put toward long-term goals, such as retirement. Moreover, by living within your means today you are effectively reducing the lifestyle you will need to support in retirement.
One of the clearest ways to reduce your spending is to always think in terms of a simple and powerful goal: I deserve to be in control of my financial life. Make that your mantra. Call upon that thought any time you are considering a purchase. Yes, buying the tricked out new car is enticing. But will the hefty payments help you gain control of your financial life? Yes, joining your pals for a blowout long weekend trip to Vegas sounds fun, but will it help you gain control of your financial life if you end up racking up credit card debt to pay for the fun? Keep your mantra close and I bet you will soon find yourself making all sorts of smart money decisions-big and small-that will put you on the path to financial independence.