No matter the definition, everyone wants to gain financial freedom or financial independence.
I like financial freedom better. It describes what financial independence offers – freedom.
It's the freedom to make decisions about your life (work, where to live, what to buy, etc.) without concern about money.
You may seek retirement at an early age or in the more traditional way of working and saving over a long career and retiring later in life.
Those who achieve financial freedom early have one thing in common.
They know their “why.” Another way to say it is they know their purpose.
Without it, we may feel stuck in a job we don't like, working longer than we want, and struggling to be content in our circumstances.
So, if we don't know our purpose, our “why” what can we do to find it?
Purpose – defined
Here's how Dictionary.com defines purpose:
- The reason for which something exists or is done, made, used, etc.
- An intended desired result; end; aim; goal.
- Determination; resoluteness.
There is a lot to unpack here, isn't there?
The first definition gets to the heart of it. Our why or purpose is “the reason for which something exists or is done...”
We could write a whole thesis on this if we wanted to get into the weeds. It might be a fun exercise and would likely initiate a lot of comments.
I'll stick to the topic at hand as to how our purpose can drive us toward financial freedom.
Money without a purpose
Money is usually not the best motivator.
Accumulating stuff will not make us happy.
We'll never be able to accumulate enough stuff to fill the gap. The more we have. The more we will want. If we strive for the newest, most shiny objects, there will always be something on the horizon we want. Money without a purpose always leaves us empty. It should be a means to an end. If it is the end, it will cause more problems than it solves.
Maybe the drive comes from a competitive attitude where we compare ourselves to others and want to “keep up with the Jones.” Or perhaps we find our identity in what we accumulate. These things may also represent success in the world. I've met many unhappy millionaires.
The number one issue in marriages is money. I'm not suggesting that if you live this way your marriage will end up in divorce. Evidence suggests, though, that the chances increase substantially. According to this report from Marriage.com, the number one cause of divorce is infidelity.
The number 2 cause? You guessed it. Money
Different studies show differing results. Money is near the top of the list of all them.
Money with a purpose
If we know the why, our efforts point toward something we value.
Values drive behavior. Values help guide the decisions we make. They keep us on track. They help us avoid making dumb mistakes.
Spending, saving, and investing decisions should get made with our purpose in mind.
We will be more likely to stick with our budgets. It will be easier to save more. The debt we accumulate, if any, will be carefully analyzed and weighed against our values and purpose.
A valueless pursuit of money does just the opposite. Our savings habits will suffer.
Without the why our success will be elusive. We will always be restless. There will still be something else to chase.
People driven by money are often workaholics. They have little time for spouses and children.
Many justify their behavior with the declaration that they're doing it all for them.
Some may believe that in their minds. Their families would likely tell a different story.
What's your “why”?
If I asked you to define your “why,” could you? The answer for many people would be no.
Knowing your “why” helps you navigate the chaos in life.
Maybe we have high-paying corporate jobs we don't like. Because of the income and responsibilities we have, we feel like we have no options but to stay.
Most of us have some goals in life. Some of these goals are small and short-term. Other goals are more significant and long-term.
They may be career goals, exercise goals, weight loss, be a better parent or spouse, make more, save more, and the list goes on and on.
Do goals drive your behavior? Or are they like New Year's resolutions; they last for about a month and then disappear.
I would submit to you that without a “why” for these goals, they will be fleeting at best.
How to determine your “why”
Self-examination is the place to start.
As yourself these three questions:
- What do you think about?
- How do you spend your money?
- How do you spend your time?
What we think about will be the easy one. It's represented by how we spend our time and money.
It will show what the things on which we focus. We may think we're good at multitasking. The truth is we can only focus on one thing at a time. Our activities and the things we have will tell us where that focus lies.
It may not be the way we think it is or the way we want it to be. Nonetheless, the proof is there if we wish to see it.
Open up your checkbook and credit card statements to audit your expenditures over the last sixty to ninety days. You can do this manually with a spreadsheet or use some of the online tools available.
Mint.com is a great tool to accomplish this. You can connect all of your credit card and bank accounts to the app.
All transactions transfer. There are preset categories that Mint will try to match. Easily to set up your categories and add others that don't match.
You can generate reports that document how much you spent in each category.
Personal Capital is another excellent tool as well. Its dashboard is as good as I've seen in these apps. It has a very robust investment feature as well. You can link all of your investment accounts, whether brokerage, IRA or company retirement plans. Track your net worth and see your entire financial picture in one place.
Whether via a spreadsheet or one of the online tools this spending report tells you what's important to you.
What we think about will be the easy one. It's represented by how we spend our time and money.
We can only focus on one thing at a time. We will have more of what we focus on. Avoiding looking at any of this won't work.
The proof is there whether we want to see it or not.
Next, take a look at your work and personal calendars.
What do you spend your time doing? Does your work activity go into the evening and weekend?
Does your leisure time have plenty of nonwork time on it? Time with the family? Time walking, reading, time in prayer or meditation?
If not, is that the way you want it to be? A more critical question may be what does your family think? Is it the way they want it to be?
Aligning purpose with life
When your audit is complete, you'll have to decide whether that picture reflects who you say you are.
If it doesn't, think about what that picture should be.
Do you think of yourself as a generous person? If so, your activity should show that you regularly volunteer your time helping others.
Your giving statement should show an amount donated to the church or your favorite causes at a much higher percentage than the 2% – 3% national average.
If you think of yourself as someone devoted to your family, the time you spend with them should reflect that.
When you're at home are you working on your laptop at night? Do you come home from work to enjoy dinner with your family?
Do you attend your kids sporting events, plays, concerts, etc.?
If the answer is no, your activities don't match up to your stated purpose.
Do you see yourself as someone who is planning for a comfortable retirement (early or otherwise)?
If so, do your retirement accounts, and other savings and investments reflect that?
Do your retirement and investment statements show you're saving more than the minimum amounts toward those goals?
When the answers to these questions are no, your “why” may not be what you say it is.
The subtitle of Money with a Purpose is “knowledge to help align your money with your life.”
The fundamentals of achieving financial freedom are not complicated. If you read this or any other personal finance blog, you'll see some version of the following three principles.
- Spend less than you make.
- Save and invest the difference.
- Minimize or eliminate debt.
Without a “why” to accompany these principles, it will be difficult to find the discipline to execute them.
The why, your purpose, reflects your values. Your values drive what you think about. What you think about will drive how you spend your time and your money.
Like many things in life, these are simple principles to understand.
Though simple in theory, they can be hard to execute.
Having the right attitude is essential.
By the way, financial freedom doesn't come with a particular dollar amount assigned to it.
I've met people who make $30,000 a year that would describe themselves as financially free.
I've also met people who make $1,000,000 a year who are struggling.
So don't think because you don't make a lot of money these principles don't apply.
If you haven't audited your spending, saving and investing recently, there's no time like the present.
Let your purpose come to life. Let it drive your behavior. If your behavior doesn't match who you want to be, dare to make some changes.
Live your life on your terms. Those are the only terms that matter.
Now it's your turn. Can you define your purpose in life? Does it drive your behavior? How did you discover your purpose? Let me know in the comments below.
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