Financial independence is often a line in the sand. It’s says “I never have to work for income again.” Financial freedom is a different kind of thing. Financial freedom means you have a few more choices than you had before. It’s incremental. It starts small and every year we can try to grow it. There is no definitive line in the sand. It can start as a sprinkle of options and those options can keep growing and growing into a downpour.
Growing financial freedom
Here’s the awesome thing about growing your financial freedom: you can take steps every day to see real growth. And here are 7 key ways to that you can consistently grow your financial freedom. To start, you could focus on growing two or three at a time. You don’t even have to do all of them to make some real growth! It can be a fully customimizable path to more financial freedom.
Each are scalable. There not just huge milestones that might take years to accomplish! I love growing financial freedom because you can make progress every single day.
7 Pillars to Grow Your Financial Freedom
1. Pay down debt
Debt payments are one of the worst kinds of expenses simply because you can’t quit them! There are lot of reasons they limit your ablity to grow financial freedom. They eat up your income. There is often interest (or extra expense like full car insurance and PMI). They create psychological stress in ways regular expenses don’t. They limit your ability to take risks. They push up your baseline income number.
But the big reason I hate them vs regular expenses: You can’t just stop paying! If you needed to reduce your expenses so you could start a new job, travel, ramp up your savings, you could drop a lot of other types of expenses. You could eat out less, lower your food bill, give up cable or internet. But you can’t just stop making credit card payments, house payments or student loan payments. If you had a car loan, you could switch vehicles, but often there is a balance due and extra cost in doing that.
The less debt repayment you have on the books each month, the more financial freedom you will have. A BIG part of the reason we have been able to walk away from our 9-5 jobs for the last 2.5 years is because we have no debt.
2. Cash on hand
Having a bit of cash on hand will rapidly grow your financial freedom. It’s easy to see how choices quickly start to open up when we have cash in our pocket. And the more cash, the more options. This isn’t necessarily literal cash. Keep it in a bank, money market account, index fund or even in a Roth IRA. It simply means money you can access.
Depending on the season of life, pick the amount right for you. Sometimes it makes more sense to keep this number low in order to grow your financial freedom other places. When we were buying our rentals, cash on hand was VERY low because we were hustling to build that passive income. Going into this mini-retirement, we kept $50,000 on hand.
3. Lower baseline/fixed expenses
Low expenses are the jet fuel to custom designing your life. EVERYTHING gets easier when your expenses are low. You need less income. You can test new jobs. You can work less. You can spend more money on really fun or important things. You can save more. You can invest more in stocks, a business, or yourself.
Low expenses don’t mean a dull boring life. It simply means you have a LOT more options. Our monthly nut is really low. It doesn’t mean we don’t sometimes spend a lot of money. We just aren’t spending it on our monthly obligations.
For most people, paying bills each month isn’t a thrilling experience. If you could take the $1500 you were spending on reoccurring bills and drop that cash on something awesome each and every month…..well, that would be a lot more fun.
4. Grow Investments
Growing your investments creates more financial freedom in two ways. First, and most obviously, you have a resource to pull from. You can use it to cover one time costs like a home or business. Secondly, and most importantly, it will eventually drop your baseline expenses.
At some point in life, you will need to be saving about $1000 a month for retirement. How long that stage lasts depends on how soon you start. If you start in your early 20’s, you might eliminate that expense for the rest of your life.
Hopefully everyone hits the point where they just need to “cover the gap.” Your retirement savings, if left untouched, will grow to be enough when you are 65, and you just need to cover your expenses until then.
Combine that with low baseline and fixed expenses (3), no debt (1), a bit of passive income (5) and maybe some income from your own lifestyle business (7). With that, my friend, you’ve got a LOT of financial freedom!
5. Passive income
A little passive income goes a LONG way! It is AMAZING! $500-$1500 a month when combined with a few of these other things rapidly starts to grow your financial freedom. We have a military pension ($1450 a month) and two rentals ($1200 a month), which gives us a lot of options. But there are so many ways people create a mostly-passive income. I.e., We will be renting out our house while we travel this spring bringing in $2500. And this summer, when we are home, we are going to rent out our pop-up camper!
There are hundreds of ways people create income that is passive. Selling printables on Estsy, loaning money for real estate, selling stock images, video or music, leasing land, or anything you set up once and it continues to bring in income.
This is the essential component that brings all the pieces together. You need to grow the space between your income and your expenses. Then you need to “guard” it by using that money towards one of these other six items. Use that gap to pay down debt, build your investments, have some cash on hand, or invest in your own lifestyle business.
7. Building your own lifestyle business
Work is work, right? Actually, I don’t think so! We have been shown one specific way of work for so long that, for many people, it’s hard imagining it looking different (and better!). Work doesn’t have to be 9-5 for 50 weeks a year. There is something really amazing that happens when you find work that fit these three qualities:
- Square in the middle of your natural skill set and core competencies. Something that creates “flow” and you feel gifted at.
- Passion. You have an interest, internal motivation and excitement about it.
- Fits the other things you value. There is enough time, space and energy for everything else you care about. You can travel, spend time with friends, hike on nice days, drink coffee with people you love and have relaxed conversations. Or what ever that is for you!
If you can find that, why would you ever quit? In my mentoring, I work with people to help create a life that is such a perfect fit that they would never want to retire. That might be 2-3 hours a day on a project, 30 weeks a year. It might be 20 hours a week, 20 weeks out of the year. If you have the other 6 pillars working for you, you might not need a lot of income.
I’ve seen people make jewelry they sell on Etsy or at craft fairs in the summer to fund their travel. I know people who work at the ski hill in the winter or lead whitewater rafting trips in the summer. I know a lady who makes over $100,000 taking dogs on adventures in the mountains for the day. People bring in income selling veggies, starter plants and flowers at the farmers market or having a food truck just for special events. Or folks who tackle a few renovation projects each summer. Not to mention the thousand ways people create income online doing something they love.
The mold for what makes something “work” is becoming antiquated, and I believe, more risky. If you don’t have a job you love, it’s easier than ever before in history to simply build it yourself. You can write all the rules. If it is exactly in your skill set, your passionate about it, and it fits the rest of your life, why not? In fact, why would you ever stop doing that until your body or your mind gives out?
Grow Financial Freedom and Use it!
It takes time to grow these 7 pillars. Each day you make progress. But in 5-10-15 years you realize you have a LOT more options than before. Then you need to start shifting gears to actually using the financial freedom you have grown to build a life that really lines up with your purpose, passion and values. I like to call it your Custom Built Life. No two will look the same. But just like growing your financial freedom, you can grow into this custom built life.
For Adam and I it meant adopting kids, living abroad, traveling through 27 countries, taking mini-retirements, building work we love, and being outdoors all summer long. We are still building it! Just like a custom home, every part is something that we love and resonates with us.
Use these 7 pillars to grow your financial freedom. Then choose your own adventure. Custom Build Your Life. When you have the 7 pillars working together, you have a lot more options. Use them.
For Conversation: Which pillar are you focusing on growing right now?
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