I am a long time Dave Ramsey fan and have taught Financial Peace for the past 5 years at my church. I was having a conversation the other day in one of my classes with a number of students that centered around what they would do if they had Financial Freedom.
- One couple wants to retire at the beach, pick up some local jobs, and spend the afternoons and evenings with each other with their feet in the sand.
- Another lady who is a chef wants to open her own restaurant.
- Another couple wants to take a 3 month trip around Europe visiting all the places they have only read about or seen in pictures.
- One last couple wants to work with missions outside of the US building houses for those less privileged in Mexico and Guatemala.
This was a great conversation and I could see the excitement in their eyes as they talked about these dreams. So I asked them a simple question.
“Will you be able to do it? Will you have the resources in place to retire at the beach, open your own restaurant or spend your days building houses for those in need?”
Their answers did not contain the same level of excitement. This is because the common answer was simply “I don’t know.”
What about you? How would you define your Financial Freedom desires?
- Retiring early?
- Starting a new business?
- Spending time with family?
- Volunteering more?
- Giving more?
Whatever your definition of Financial Freedom is the next question is always the same… Will you be able to reach it?
If your answer is “I don’t know” or “maybe” keep reading to see if we can turn that into a “definitely!”
Let’s say your idea of Financial Freedom happens around age 65 and your dream is to spend some time traveling. Instead of wondering if you will be able to do that, here are some steps to follow that may help you know for sure.
Have a good budget setup now
The first step is to figure out how much money a month you will need to support your financial freedom lifestyle. And it all starts with having a good budget in place NOW. Why now? Because it will be easy to look at that budget and adjust it based on your Financial Freedom desires. If you don’t have a good budget in place now, you really don’t know where your money is going each month and it is harder to predict what you will need in the future. I help my clients set up their budgets in a budgeting tool called WizeFi. I will speak more about this program later.
Turn your current budget into a future budget
Now that you have a good budget set up, it is time to look into the future and try to think about how that budget will change. Do you have things like childcare, college savings, and family cell phone plans in your current budget? If so, go ahead and remove those. If you are working to pay off your house, then you can also remove the mortgage line item. (Wow! It is amazing to see how not having a house payment every month frees up money to go to other things!)
Then, start adding line items that will be needed to support your financial freedom desires. Maybe you want to save $1,000 a month to support your travels. And don’t forget about any increases in health insurance.
The end result of this process will be a future budget that tells you how much you will need to support your financial freedom lifestyle. So let’s say that came out to be $60,000 a year or $5,000 a month.
See if your financial habits TODAY support attaining Financial Freedom
Ok, now that we have a good idea of how much it will cost, the next step is to figure out are you doing the things you need to TODAY, to make sure you have saved enough so the interest generated can support $5,000 a month. The way I help my clients figure that out is by helping them set up a budget in a new software program called WizeFi. Once we account for their monthly expenses and how much they are saving for retirement in WizeFi, the program helps us see what their financial future looks like on their current path as well as their wealth potential if they were putting their money in the most optimal places each month. It is kind of like looking into the future to see how your money will grow year over year based on your spending habits today. Once this information is entered into WizeFi you will be able to see if you will have enough saved to be financially free at age 65. Of course, you can use other budgeting tools and online calculators to see if you are on the right track but I love how WizeFi puts everything together in one application.
Find out you are on the right track!
For some clients, they can see that based on how much they are spending every month and how much they are saving for retirement, they are on the right track towards Financial Freedom. Using our example, it means that by the age of 65, they will have generated enough retirement savings that the interest produced will generate the $5,000 a month they need. I think congratulations are in order, but why stop there? The next step could be modifying your monthly expenses and retirement contributions to help you reach Financial Freedom before 65. And using WizeFi, I help my clients make those adjustments and immediately see how much faster they can reach Financial Freedom.
You find out you have some work to do!
So using our example, we may see that by the age of 65, we will not have enough saved to generate $5,000 a month. But congratulations are still in order! Why? Because now we know and can start making adjustments. Again, using tools like WizeFi, we can start adjusting our budget to reduce monthly expenses and/or get rid of debt so we can free up more money for savings. Once we adjust those numbers in WizeFi and start applying more money toward savings, a new path is created and we can see reaching Financial Freedom at 65 is within our reach!
I found that most of the anxiety around your finances comes from “not knowing.” However, if you spend a bit of time getting a plan together and organizing your money you will know exactly where you stand today and get a much clearer picture of your financial future!
If the steps above seem a bit overwhelming, maybe you need a partner to help you. If so, please schedule a FREE 15-minute call and let’s set up a quick call to talk about your situation and how you can get on a better path to Financial Freedom. I hope to hear from you soon!
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