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Declare Your Financial Independence!
July 3, 2011
Happy Independence Day! I read the full version of The Declaration of Independence every 4th of July. Not as popular as fireworks, but I am fascinated by this document and its place in world history. If you have not read it since high school, I encourage you to read it again from start to finish (not just the first two paragraphs).
I find myself this Independence Day not only reflecting on the desire of the people to declare independence, but on the desire of the individual to obtain their own financial independence. Some perceive financial independence as the freedom to say goodbye to their employer for good and retire. This perception may be at the heart of financial independence, but I believe there is more.
Declare Financial Independence from the Bank!
Wouldn’t it just be nice to tell the bank, or any lender, goodbye? What a sense of liberation! Today, individuals are finding it increasingly more difficult to finance or refinance a home. I have heard the term “good” debt. It seems like an oxymoron to me sometimes. Your home may be vital to your pursuit of happiness. It provides you shelter and security. It may be your playground. It may be part of your identity. To be overburdened by debt in order to keep this vital aspect of your life is not financial independence. In fact, it may not be living at all. Debt, “good” or bad, can weigh on an individual, both consciously and subconsciously. This is not to say that you shouldn’t borrow money to buy a house. Under most circumstances, it is necessary in order to purchase that first home. But if financial independence is what you want to declare, then you will have to pay off your debt and remain debt free.
Declare Financial Independence from the Government!
But it’s my biggest tax deduction! Have you ever heard the expression “the government can giveth and taketh”? At one point the US government allowed taxpayers to deduct consumer interest. They repealed it. If the government decided to repeal the mortgage interest deduction, how would that impact your personal finances? What if the government changed another program that has significance to you? Should I even mention Social Security here? Don’t put yourself in this position. The less you rely on the politicians in Washington to provide you direct economic benefit, the more financially independent you will be.
Declare Financial Independence from Family!
For young adults, pursue a worthwhile career and live responsibly so that you can become financially independent from your parents. They will love you for it. Of course, they will love you either way, but don’t be 30 and living in their basement. I have worked with widows and divorcees who have found themselves suddenly responsible for their own financial independence without proper preparation. Empower yourself with financial knowledge and an understanding of your financial situation. Independence can be defined as self-reliance and free of control. I believe financial independence from family brings them closer together on the important matters of life, not further apart. Depend on your family or spouse in areas other than financial.
On this Independence Day, reflect on your own financial independence and the things that stand in its way. It may not be on the same scale as the Declaration of Independence, but in my opinion, financial independence is a cause worth pursuing.
Do You Have a Financial Fitness Plan?
June 24, 2011
Like many people, I was paying for a gym membership that I rarely used. Sure, I would put together a streak of regular visits for a few days or weeks, but I never felt like I was making any real progress toward my goal. In fact, I’m not even sure I had a goal. All I knew was that I had the obligatory membership, and my workouts were designed as if my fitness goals hadn’t changed since high school…when I played organized sports. But I had changed since then. It was clear to me the do-it-yourself plan was failing miserably. So where does someone who has always belonged to a gym turn to get help with physical fitness?
In 2009, my New Year’s resolution, like so many before, was to get into shape. But this time I knew I needed to do something different. My gym was about to start a new program called Fit Club and I paid the extra money to join. The entire program was administered by trained professionals. No more do-it-yourself fitness magazine workouts. Participants began with an established goal – get physically fit by trimming the fat.
For the first time, I had a professional analyze the key measurements of my physical condition—an enlightening experience that let me know exactly where I was starting from and helped me to further define my goals. With the help of my trainer, I worked on getting from my current physical condition to my goal.
My first assignment was to start keeping a food log. Who knew a bag of popcorn washed down with some wine was a bad dinner? Acknowledging every calorie I consumed was eye opening to say the least. We also did the new and improved hour-long workouts three times a week. Big changes didn’t happen over night, but I did see and feel the difference quickly. When the first six weeks were finished, I signed up for round two. My successes encouraged me to keep working toward my goals.
This experience changed the way I viewed physical fitness, as well as financial planning. I now view myself as a financial “trainer”, helping people become more financially fit. Like my physical fitness, I can bet that your financial condition has changed over the last 15 or 30 years. Your view on life, your financial situation, or your financial objectives have probably evolved over that time, as well. But because we tend to stick with what we know, like my tired do-it-yourself fitness routines, it’s also likely that your financial plan hasn’t changed much.
Has a professional analyzed your financial “measurements” and given you sound advice? Have you tracked your financial “calories” to see where your hard earned money is being spent? A food log is to losing weight as a household budget is to saving money. They are both formulas. In order to lose weight, you have to burn more calories than you consume. And in order to be financially fit, you have to earn more money than you spend. But nobody I know can count calories for a sustainable period, and most people don’t keep a meticulous budget for long either. However, people still lose weight with modifications to their diet, and I believe people can save money with smart planning without the laborious task of religiously tracking their spending.
I view comprehensive financial planning as the process of taking your financial measurements, analyzing your situation, setting attainable goals, developing a financial workout routine, and having a professional advocate in your corner who has the same interests in your financial fitness as you do. You may be a member of a gym full of investments and financial products, but are you really in the best financial health you can be? Working with your own professional financial “trainer” to improve your financial fitness could help you finally reach your financial goals.
Welcome to my new blog!
May 14, 2011
A blog can be a great way for individuals to communicate their thoughts to the public. The purpose of this blog is to give readers some insight into general financial planning topics. It will also give readers insight into my firm’s approach to the financial planning process.
Thank you for visiting my site, and please stay connected as I publish more entries.
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