Financial Freedom (an alternative perspective)
Financial freedom is a common goal and an amazing thing to experience, but it often gets tied together with the idea of penny-pinching today so you can save for the future — with the end goal being to amass as much money (and stuff) as possible.
Regular people call this “saving for retirement.”
Others take it to an extreme and call it F.I.R.E. (Financial Independence Retire Early)
Some people don’t save at all and just hope for the best, but a lot of us somewhat goal-oriented folks at least feel like we should be making sacrifices today so that eventually we can retire fabulously wealthy.
Whether or not we successfully do that, of course, is up to our personal motivation, willpower, and ability to strategize.
But is accumulating money and stuff truly the highest ideal? Should it really be our priority? Do we really need to feel guilt over not making sacrifices today?
Of course, it’s very nice to have resources, comfort, and even luxury. But that doesn’t mean it’s necessarily best.
We all know that “money doesn’t make you happy.” At least we know the phrase. Though I can attest that, at least personally, for a long time I felt like I probably would be happier with more money, a nicer house, and a few more vacations.
And up to a point, that was true. I was a lot happier when I got to a point of making $50,000/year than I’d been when we were scraping by on $20,000/year.
And it makes sense. $20,000/year, at least in most of the U.S., isn’t really enough for a family to meet their basic needs on. It’s not enough for basic housing, utilities, food, and transportation.
Which meant I was always stressed about money and about accumulating debt. I worried that we might sink deeper and deeper into a hole that we could never climb out of.
Earning a little bit more made a big difference (both physically and to my emotional health) though of course it didn’t take away all my problems and did bring a few new ones.
But one thing it didn’t change was the feeling that I should be making sacrifices today so that I could be truly wealthy in the future.
Over the past few years, God has taught me a lot about reliance on Him and making my own plans.
A verse that I’ve really taken to heart is Matthew 6:19-21, which says
“Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. 20 But store up for yourselves treasures in heaven, where neither moth nor rust destroys, and where thieves do not break in or steal; 21 for where your treasure is, there your heart will be also.”
Here are a few things I’ve come to consider to be more important than future opulence:
- Prioritizing things that last, such as my relationship with God, my family, and my “neighbors.”
- Enjoying the blessings God has given me today, rather than trying to sacrifice them to guarantee future happiness.
- Loving others by regularly sharing what resources I have.
- Setting aside enough that I’ll be able to continue to do those first two things until I die.
(Though it’s worth a lot of thought about exactly how to do that last one… because just bequeathing money to others upon your death doesn’t necessarily truly help or bless them. Receiving money can fix temporary problems but doesn’t change people, so if people are in financial difficulties due to mismanagement of their finances then giving them money might solve their problems today, but they'll quickly find themselves in a similar situation.)
I’m a practical person, so the next place my mind goes is then, how? Having better goals is better, but only helpful if we have a plan for how we’ll fulfill them.
Here are a few thoughts on the HOW:
- Earn More
If we want to enjoy a better lifestyle today and/or in the future, then we need to increase our resources. People often try to do this by scrimping and saving, but not only is that uncomfortable and leaves you with guilt when you do spend money, it also has very limited effectiveness.
Back when I was earning $20,000/year, we didn’t even have quite enough to get by on. I felt like I SHOULD be saving, and I tried to. But the maximum I possibly could have saved was $20,000/year, and aside from that fact that that wasn’t actually “possible,” since we had to eat, it also never would even get me to that “fabulously wealthy” goal.
In other words, it would have been an impossibly huge sacrifice for a mediocre outcome.
Earning, unlike saving, doesn’t have a cap. While the max I could have saved was $20K/year, there wasn’t any limit on the max I could potentially earn.
And, in fact, I got to see that in action. Over a period of a few years I doubled, quadrupled, and eventually more than 10X’ed my income by improving my skills and changing my strategies for earning a living.
Not only did that make a much bigger difference, it also came at a much smaller cost. In fact, I enjoyed and am thankful for the lessons I learned and how my character was shaped as I put in the necessary effort.
- Work Less
We can only enjoy today’s blessings if we take the time to do so. And while I’m a firm believer that work isn’t something to be avoided. That, to the contrary, God gave us work for our benefit and enjoyment — and, after all, even God “works” — God also took time to rest and enjoy his creation. And we can only enjoy the fruits of our labor if we, too, rest.
But this isn’t just about taking Sunday off. Because, if you think about it, most of us do a lot of “work” even when we aren’t in the office. We work to take care of our homes. If we have children then we work to take care of them and to parent them. We work to prepare meals. We work to learn new skills. We even work to maintain friendships and bless others.
Those types of work are just as “real” and as important as the work we do to directly earn money. And do we really have enough time to do those important things if we’re spending 40-80 hours every week in an office, away from our families, friends, and homes?
Some people seem to make it work, but personally, I’ve never found a way. After 8 hours for sleeping and a couple hours for eating and resting each day, we have 12-14 hours left for all the various kinds of “work” we need to do. What percentage of those do you really want to spend working for money vs working to raise your kids vs working to bless others vs working to take care of yourself vs working to take care of your home vs any other responsibilities you have?
It’s at least worth some intentional thought, rather than just accepting the 40+ hour work-week norm of our stuff-obsessed culture.
- Spend (on things that really matter)
Whether we worry too much or too little about it, we all spend money. We have to to survive.
So, when it comes to fulfilling my goals for thinking — and acting — differently about money, how does that affect spending?
When we spend, what do we spend on? First, of course, on necessities. Food, shelter, basic clothing. It’s obvious, but not always instinctual. When I didn’t have quite enough I lived in fear of not having enough, and in response I ignored my finances and spent money on things I couldn’t afford.
But if we choose to trust that we’ll always have enough, then we can make rational choices and first spend on the necessities.
After that, if there’s more to spend, what will we prioritize next? It’s easy to get distracted by the physical, material “stuff” we can accumulate for security or to “keep up with the Jones’.
Physical things seem to have lasting value. But, as the saying goes… “you can’t take it with you.” It’s all going to burn, and eternity will be a LOT longer than our short maybe-100 years here on earth.
So what can we spend money on that really matters?
- Experiences — adventures and learning experiences, definitely, but even just sensual things, like good food, at least create memories we can look back on fondly.
- Caring for others — a warm, comfortable home might be a good way to care for your family and visitors; sharing money with people in need; blessing others with a meal;
- Learning — classes, books, adventures… these are experiences and also can sometimes help us improve our character as well.
- Help — if finances allow, hiring help is one of the few ways you can actually “buy time,” which you can then spend on relationships with others.
Of course, these are just a few ideas. There are many other good ways you can spend your money. The most important part is just to be intentional and make sure you’re spending it on things that last.
I already touched on this a bit, but sharing with others is an obvious way to bless and love others with the resources we’ve been given. And it blesses us right back! Our character is improved when we share and we also get the joy of giving.
Some people like to regularly “tithe” 10% of their income. I can’t claim to every have been very consistent about that, though perhaps it’s something I should work on.
My personality is to be spontaneous and creative, and that’s how I’ve always given as well.
Again, the reason this is important to me at all is because I’ve decided to make loving and blessing others one of my financial priorities — and to prioritize that over future wealth. That’s not to say we might not be able to have both, but, if you had to choose… which of these things is more important to you? I know it might be an uncomfortable question, but I challenge you to sit with it and work through the discomfort to be honest with yourself. Why is it uncomfortable? Is it because you’re unhappy with your answer? If so, do you want to change your answer?
- Save (and hedge against inflation)
Balancing the spending, sharing, and saving is mostly about a mindset shift. I believe God has given me these resources today to bless me and others through me. It’s my job to be a good steward of these resources, but he gave them to me for my blessing and enjoyment. I don’t need to feel guilty about enjoying the blessing God has given me today, and I know he’ll take care of me in the future as well.
Of course, that doesn’t mean we should just blow all the cash we receive, either. Being a good steward means setting some aside for a rainy day or for when we become too old to continue to work. You’ve heard that plenty of times, but most people don’t save that way any more — they either don’t save at all, and just hope things will work out, or they save and put their security (and hopes and dreams) in their savings.
My goal with saving is to set aside enough for the emergencies that we all know are an inevitable fact of life. I don’t want to be “up a creek” or end up a burden to others by not thinking ahead.
And along those lines, there’s one very big future “problem” of sorts that we can all anticipate — getting too old to work.
It’s a careful balance — setting aside, or “saving” some of our resources for the future, while, at the same time, not trusting in that “treasure” for our future happiness or security.
One other aspect of saving that I can’t not mention is hedging against inflation. As you’re probably aware, at least in the U.S., our government has more than tripled the number of dollars in circulation in just the past few years. Simple math tells us that means our dollars will soon be worth a third what they used to be… and since I’m not really expecting lawmakers to change their ways, I assume the trend will continue and the value of the dollar will continue to be eroded.
All that to say — “saving” in cash, money in the bank, or even low-risk investments that pay small annual rates of return is, at least in my opinion, a very insecure way to prepare for the future at all.
How can you hedge against inflation? Of course, there are many strategies, but the simplest option that makes the most sense to me is simply to save your money in the form of resources that can’t have their value inflated away by someone deciding to type of few extra zero’s at the end of a number in a computer. By this, I mean metals, property, and other real assets.
- Invest (and there are lots of ways to do this)
If we want to enjoy a rich life today and have plenty to share with others, then we’ll want to not just “earn more” but also grow our money by investing.
The most popular type of investing might be stocks, but you have to stop and ask why that is… Because, often, when something is popular, it’s because someone has spent a lot of money marketing it…
We won’t get into that now, but, what I will say is that there are lots of different ways to invest your money, and a lot of them can give much higher rates of return, secure your resources in more real assets than paper or digital currency, and even give you some influence over the success of the investment.
For example, of course you can do your research and be smart about what stocks you choose. But, once you invest in the stock, your money is out of your control aside from the option to sell. You typically can’t influence the success of the company or the return you get on that investment.
On the other hand, if you invest into a business you’re the owner of, you can make decisions that can make the company become more successful. Many businesses can be started with as little as a few hundred dollars and can earn you thousands of dollars in passive income within as little as a few months. Think about that rate of return!
Or, for another example, let’s say you invest in real estate. Some aspects of that are completely out of your control. Of course, the property’s value will be affected by the market. However, even aside from the 10% average that, over time, real estate increases in value each, you also can directly affect your rate of return by choosing to improve your property or by managing it well as a rental. Using these strategies, you can recoup as much as, or more than, 100% of your investment each year, in addition to the future payout when you might eventually sell the property.
For example, a few years ago I bought an investment property, spending just about $10,000 for the down payment and closing costs. Over the next four years we invested another $5,000-$7,000/year in improving the property, but we more than offset that with the almost $10,000 per year we earned in rental income profits. We then sold the property for about $120,000 more than we’d originally purchased it for. All told, we earned a 421% return on our money over those four years — more than 100%/year.
Of course, these are simply a few examples. The big takeaway here is simply that there are different ways to grow your money — and those that allow you to be more actively involved not only can be more secure but also can offer you much greater rates of return.
What are your financial goals? Answering this question may require you to be brutally honest with yourself about what you really desire. And you might not be happy with the reality.
Do you want to change? If so, why?
Something to think about: our true desires aren’t necessarily what’s best. We often want things that aren’t for anyone’s real good.
With that in mind, rather than letting our financial decisions be guided by our “true desires” or wishes, maybe a better question to start with is “What are the best goals for my finances?” and then follow that with some thinking about how we can fulfill those goals.