Our fearless and wise founder, Mackey McNeill, landed on a profound concept when she identified three key factors that most influence our pursuit of prosperity: time freedom, money freedom, and mind freedom.
By working to achieve these three freedoms, you create an environment and ways of being that lead to abundance. But for many of us, thinking this way requires a paradigm shift — it’s certainly not how society is programmed to think about wealth management!
We’ve talked about time freedom: what it means, what it can look like, and how to achieve it. Today we’re focusing on money freedom.
The lines between money freedom and mind and time freedom can get blurry. These things don’t exist in a vacuum! But, essentially, money freedom is about having money and spending that money on the things you want to spend it on. Sounds simple, right?
Not so fast. Often our spending patterns aren’t always in alignment with our values. Achieving money freedom is about taking steps that allow you enough financial freedom to choose how and where you spend, but also to ensure that your values guide your purchasing decisions.
What Is Enough?
Personal financial planning is personal. It shouldn’t be delivered in a one-size-fits-all package. This is because our values and priorities are uniquely ours.
In addition to articulating our values, one of the most important concepts to explore is our personal definition of enoughness.
What does a satisfying life look like to you? Does it involve retirement? Does it involve a certain type of home? Does it involve travel? Extended time with family and friends? The ability to leave a legacy?
Essentially, when will you be satisfied?
If we don’t take the time to actually define this, we run the risk of falling into a trap that so many experience: We continue to reach for more — even if we don’t actually need or want more.
Defining enoughness isn’t a one-and-done exercise. It’s something that requires careful consternation. It’s also something that will likely evolve as you accumulate new life experiences.
We recommend starting this process by reflecting on two questions, which is how we start all of our Prosper for Individual plans:
What is your ideal? If all your dreams came true, what would your life look like? Dream big. Then dream even bigger. Identify a pie in the sky vision of your life and all that it entails.
What is your acceptable? What does a content life look like? Maybe you can’t have it all, but what would make you happy?
Exploring these questions helps you reach a definition of enoughness — of a point you can reach where you step back and say, I don’t need to keep reaching anymore. I’ve found what I’m looking for. I’ve arrived.
The Many Looks of Money Freedom
While defining enoughness is essential, achieving enoughness requires some basic knowledge, strategies, and financial principles. This is often where your financial advisor comes into play, helping ensure you’re making the most of the money you have and managing your money in ways that set you up for success.
Here are seven things to consider that (when aligned with your personal values) helps you along your journey to money freedom.
More in, less out: This one’s pretty simple. Don’t spend every dime you earn — and certainly don’t spend more money than you can afford to spend.
Avoid the ‘bigger, better deal’ trap: Think back to your definition of enoughness. Are you trading in your car for a luxury model because you’re a car fanatic? Or are you trading in your car for a luxury model because you’re programmed to think that bigger is better?
Eliminate debt (or use it strategically): If you’re carrying debt — particularly high interest debt — you should actively work to pay it off. But debt isn’t always bad. Certain types of debt can be used to build wealth. Knowing which category your debt falls into (and then acting accordingly) is an important point to clarify.
Approach your big purchases strategically: There are a few different smart financial strategies for dealing with mortgage payments. It’s a great example of how one solution isn’t always the best approach for everyone. For some, paying off their house early makes the most sense. In these situations, you need enough cash flow to pull it off, and you also need to think about how long you plan to stay in your home and the current and projected state of the housing market in your neighborhood. For others, sticking to your lower monthly payment may free up additional cash to invest or put toward other savings strategies. Both make sense, but choosing which route to go depends on your unique values and circumstances.
Allocate funds into buckets: Earmark your earnings for certain spending priorities within your life. If you love to travel, create a travel fund. If you’re a skincare fanatic, set aside a certain amount each month for your esthetician. This will protect your money from getting eaten up by impulsive shopping sprees and last-minute urges for carry out over a home cooked meal. By creating a separate savings account, you’re able to automatically set aside money for the things you value most.
Plan for unexpected purchases: Slush funds and emergency funds aren’t particularly groundbreaking, and that’s for a reason — they’re important!
Slow down and make informed choices: Many of us are conditioned to get a little trigger happy with our money. We all can benefit from slowing down before we spend, especially with large purchases or immediately after we come into more money via an inheritance or a big raise. Just because you have more money doesn’t mean it needs to leave your bank accounts (at least, not immediately). If you just got a big raise and are thinking about buying a new house, hold off for a year or two. Set the additional money that would go toward a larger mortgage payment into a separate account. See how that feels. Test the waters. Try out your new budget. After a bit, if it still feels like a good idea, move forward with confidence.
Money Freedom Is a Process
Achieving money freedom isn’t easy. If it were, there’d be a lot less need for personal financial planners! But while it’s not easy it is possible.
Attaining money freedom requires you to tune in to your actual wants and needs, reflect on life, and adjust accordingly. And it also requires some number crunching, which is where we can really step in and help you align your goals with your current and projected financial picture.