Retirement used to be defined as something you do at the end of your life: save your money so that someday you can retire and “live the good life.” This idea has become entrenched in our society as the cornerstone of long-term financial and life planning. Well, right here and now, I ask you to challenge that idea. For most people it is a bad goal and a misguided life plan.
Why should you have to wait until you are sixty-five (or older) before you can live the life you wish? Who says you must wait until you may be too old or too sick to enjoy so many things in life to the fullest? Instead, replace the R-word, retirement, with two new ones: financial freedom. This is the goal to pursue.
Achieving financial freedom means being able to work at what you want, when you want, live where you want, and to have it a lot sooner than sixty-five. Even with the tough economic climate, you can still make this happen. If you don’t think so, the only person standing in your way is you. The first step to reaching the goal of financial freedom is to change the way you think about retirement.
There are two ways to accomplish financial freedom: Either possess the money you need to be totally free to do whatever you want; or possess enough money to be able to earn less and live a better life a heck of a lot sooner. And who doesn’t want that? You shouldn’t have to retire to live the live you want. Make a plan to accomplish that goal and begin now.
Say you’re forty-five or fifty and you have saved reasonably well but aren’t at a point of total freedom. The family income is $6,000 per month after taxes and the family needs $5,000 per month after taxes for living expenses. Your savings and investments can provide $2,000 per month after taxes. This means you now need to make only $3,000 per month more after taxes to live on. This leaves you a lot of options. If you’re a two-income family, one of you can stop working. Or you can shift jobs or careers, work part-time, or end a brutal commute. You could also choose to stop working for a couple of years to do something you’ve always wanted to do or explore something you’ve always wanted to see. You can move your life closer to the life you want and do it long before you are sixty-five.
Even if you’re in your twenties, this point is no less relevant. Why should you accept the idea that you must live a life that is less than you want it to be for the majority of your time on earth? The younger you start, the bigger the win. How does partial freedom by forty and total freedom by age fifty-five sound? The sooner you reject the idea of total retirement and focus instead on financial freedom, the easier and faster it will be to achieve.
There is also another issue to consider. To completely stop working may be a bad idea. Having something to do is a key part of who you are and of what life can be. Why not spend some of your time doing something rewarding that you really enjoy doing? Do you really believe you will like being fully retired? If so, that’s fine, but think about pursuing work that is truly fulfilling and rewarding as a goal. If you are financially free, you will have the luxury of choosing the work you do and how you spend your precious time.
Don’t lose sight of the fact that you can make financial freedom happen a lot sooner than you think. Maybe you think you’re not capable of reaching your goal. If so, there’s something you need to know. You’re wrong. Start planning for financial freedom now. It is within your reach.
In the next blog, I will talk about some practical steps you can take now to put your financial freedom plan into place. As a financial coach who helps people set up personal financial plans that they manage themselves, I always recommend setting financial freedom as a goal. By first defining what it means to you, you can set up a truly personalized plan.