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Okay, that is a big headline. And this is a hard topic for some. But there really is just one secret to financial freedom to learn. And no, it is not how to write the perfect budget or consolidate all your debt with the perfect debt consolidation loan. Those things can be extremely helpful, but they aren’t your big tickets to freedom.
It is not the ability and freedom to spend however much you want, whenever you want, on whatever you want… that would be called obscenely rich and that’s not what this ultimate secret is going to do for you. Financial independence is having enough income, savings, and assets to cover your living expenses, inflation, and the occasional dinner and a movie for enjoyment. Financial freedom is in addition to financial independence, and it is about having enough savings to cover your car’s engine blowing, or splurge on a fancy vacation once every couple of years. Financial freedom is the freedom to live your life without worrying about money. Financial freedom gives you the ability to live a life that is full of meaning, fulfillment, and purpose.
Being stuck in financial imprisonment might look like:
43% of Americans carry over credit card balances every month, and Americans that carry debt, spend 33% of their monthly income to pay it off. That is what financial imprisonment looks like.
It’s time to break free.
The ultimate secret to financial freedom is that you need to change your mindset regarding money. The way you feel and think about money has the biggest impact on how you spend it. More than a budget. More than a financial counselor. More than anything. Preparing a budget is a great tool that will tell you what you can afford to spend. Budgets are important in this way. But a mindset of saving and being financially free asks you what you should spend.
Remove the emotional feelings from money and it becomes just a tool. Just like any other tool you would use to build something you want. Say you’re building a house. You have tools (hammers, nails, and wood) that you need. You wouldn’t destroy your hammer putting down the floor, because then you wouldn’t have it to build the walls later. You wouldn’t use all your wood and nails on the walls because then you wouldn’t have a roof later. Money is the hammer, wood, and nails for your financial freedom. Just a tool, and you must use it wisely.
The ultimate secret is that you need to stop thinking about how much your friends spend on their designer handbags or golf clubs. Stop thinking about what your neighbor has and stop thinking about what the other parents at your kids’ school drive.
The ultimate secret is that most people do not care what you drive, what you’re wearing, or what brand your 9 iron is. They are not going to look down on you. And if they do look down on you for those trivial things, they were going to find a reason to look down on you no matter what.
There is nothing wrong with driving a really nice vehicle or carrying the best handbag, but you need to think about what you’re losing in your future to have those things.
The mindset that you need to have requires patience. It is about saving. It is viewing money as a tool, and not as something to use on every want. It is a mindset that tells you, “I’m not spending $5 on a cup of coffee when I have coffee at home or at the office.” Do you need that coffee, or do you want it? (Hint: We’re pretty sure no one has ever died from NOT drinking a Caribou or Starbucks coffee, no matter how much we all love it.)
Be honest with yourself when it comes to wants and needs. Do you need a brand-new Chevy Camaro, or will a used Honda Civic get you there? That’s an extreme example, but the point is the same. Do you need a brand new snow blower, or will a used one from your local shop move your snow? Would you rather have that brand new, elite Driver for golf season now, or pay off a debt later and be more financially independent?
The mindset is in postponing your wants, refusing to pay top dollar for things that you can get for less, and not borrowing for things that you really don’t need.
Your homework is to really consider your wants and needs. Be honest with yourself. What do you currently own that was purchased because of a want and not because of a need? What do you currently own that you could potentially sell and replace with a less expensive version?
Change your mindset and you can break free from financial imprisonment.
