The Daily Choices of Financial Freedom

The Daily Choices of Financial Freedom

If given the choice, most people would choose financial freedom over financial servitude. Who doesn’t want to be financially independent where their money is working for them as opposed to them working for money? The problem for many is that becoming financially independent is something they think about, but hardly visualize as something they can achieve. Most get too caught up in the struggle of navigating the waters of daily living where in the heat of the moment spending tends to win out over saving. The truth is that ultimate financial freedom is not about making a single choice to attain it; rather it is about making many choices on a daily basis that will make it a reality.

Clearly Defined Goals Leads to Smarter Choices

Setting long term savings goals, while essential, is not always effective if without a clear plan. When looking into the future and seeing the need to save $50,000 for a down payment on a house, or $2 million for a secure retirement, people can sometimes become paralyzed by the sheer magnitude of the goal.

Suddenly, the goal doesn’t seem realistic, which can deflate any motivation to start saving. But, when they take a moment to break those goals down to their smallest incremental steps for achieving them, not only do they appear much more attainable, it can unlock a number of small choices a person can make each day that will put them on a track to actually achieve them.

Take, for example, a 35 year old couple earning a combined income of  $115,000 who start hearing their friends and family discussing retirement savings strategies suddenly realize their retirement time horizon is just a few decades off, yet they have done nothing to accumulate any savings. Based on a round number calculation of what they will need to enjoy a modest life style in retirement, they determine that they'll need to accumulate $1 million. Assuming they are able to achieve an average return of 7% over 30 years, their annual savings need is $12,000 or $1,000 a month. To someone who has spent most of their lives consuming (which is very common while starting out) that amount may seem out of reach – until they break it down further.

On a weekly basis they will need to save $230 which is $230 they is currently spending on something else.  Daily, that comes to about $32. The question becomes, is there something that is costing them $32 a day that they don’t really need?  .

The Freedom of Choice Leads to Savings

Where can a couple who has been spending their entire life find $230 each week? Through the daily choices they make. And, those include the choice to buy café latte each day ($40), to drive their car unnecessarily ($30), to eat a meal out ($25), to buy movie tickets or some other entertainment ($30), to buy expensive brands versus generic ($15), to buy a weekly case of beer or bottle of liquor ($30),  buying a daily snack or soft drink ($3), watching premium cable ($10), the weekly impulse purchase of clothing or household goods ($25), to use a more expensive cell phone plan ($5), to add to debt by using credit cards ($10).  That’s $230 worth of choices.

Granted, many of these are lifestyle choices, but those are usually the ones that cost the most and are the easiest to choose (or not choose) to spend money on. The key is in understanding that these are not merely minor lifestyle choices; rather they are a choice between future financial freedom or financial servitude.

Financial planning and investment advisory services offered through Castlebar Asset Management, LLC a registered investment adviser. 

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