Finances are often a forbidden subject in everyday conversation. It can be difficult to talk about because as a society we lack financial education, and we often feel lost, and possibly ashamed of what we aren’t doing or don’t have financially. On top of that, we are bombarded daily with images of unrealistic and near-fantasy home and lifestyle situations of people who are positioned as our peers. Combine this with not being fulfilled in important areas of our lives and it is a recipe for wrecking our joy. We become filled instead with envy, competitiveness, depression, anxiety, and a general detachment to true reality.
It’s true money can’t buy you happiness, but having a solid financial foundation can do wonders to reduce the underlying anxiety that fuels many things including your attitude, self-image, relational success, and even your ability to pursue your purpose and passions in life. There is freedom in financial stability, and it’s worth the time and the effort to educate yourself so you are able to manage your home and life better, so you can be better, and live better, and yes, possibly be happier.
What is Financial Stability?
Financial stability goes beyond having money in the bank and paying your bills on time. It means getting out of crisis mode. Thriving instead of surviving. Feeling in control in spite of your circumstances. It means getting to a point where you have freedom – in your job choices, in where you live, in how you live, and in what you are able to invest in or give to.
Imagine how differently you would live, or the things you would consider if you were financially stable enough to do so.
Like be able to leave your job and not wonder how you would pay your bills until you found a better one. Or something more relevant in these Covid times, what if losing your job didn’t throw you into crisis mode, wondering how you would pay this month’s bills?
What if you were able to invest in that thing, or that company that you KNOW is going to be successful?
What if you were able to give to someone or a family in a way that impacted them so much it was life changing?
What if you didn’t have to work multiple jobs, or a crazy amount of hours? Imagine all the other things you might do with your time and the possibilities of where that might lead you.
What if staying at home with your kids was an option?
Financial stability is freedom. It’s living instead of just surviving. Money is an inevitable part of our everyday, and like it or not, we need it to live. You can do so much more with your life, and for others, if you take care of your financial health first.
Planning the Future
The earlier you start thinking about and working towards your financial goals, the better, but definitely by the time you’ve reached adulthood and started working in a full time job, it’s important to stop and really set your goals and intentions for what you want in life, and determine how you plan to accomplish those things. Especially with finances.
Before my husband and I combined our finances (which we did about six months prior to getting married, after having lived together for a few years), we literally sat down with a pen and paper, and discussed everything about our finances. It was important to us to be on the same page with everything from where our paychecks would be deposited to, to how we would pay for groceries, to whether we would have our own separate accounts or only joint, to how much money we wanted to have saved before having kids, etc…We talked about it ALL.
Everyone has their own opinion about combined or separate finances with your spouse, we’re not here to debate that topic, but we will say we feel rather strongly about being unified on the financial front in order to reach for your financial goals in the strongest and most efficient way possible. With that said, money management is a highly personal thing as we will always encourage you to do your research and determine what works best for your unique situation and personality. Either way, money is the #1 reason for arguments between partners, and having an open and honest discussion about it, and approaching it together is invaluable!
If you are not getting married or joining a partnership, identifying all of the above for yourself is still of equal importance. You cannot hit a target if you don’t have one. Determine what is important to you, set goals to make those important things happen, and then figure out how you are going to get there.
I think it’s safe to say that all of us would like to retire. The difference lies in how important it is to us whether that retirement comes sooner rather than later, and how we define retirement.
This is another situation where having a goal is crucial. You can contribute to a retirement account, and think of retirement as a “one day” or “some day” concept, or you can take a more active approach and set a goal age and get aggressive about achieving that goal.
A few years ago when we really buckled down with our finances we did this exact thing. We both agreed that we didn’t want to spend our entire life working and chasing money. We became determined to figure out how to end that cycle. We wanted to retire at ages when we would still have the energy and the desire to enjoy life, and travel, and do the things we couldn’t when we had to check into a 9-5 every day.
We also acknowledged that retirement for us might look different than for other people. We knew it wouldn’t mean golfing every day or living in a retirement community. We didn’t want to have to barely scrape by each month dependent on our social security checks.
We both like to work, and knew that in some capacity we would want to be able to continue working in ways that we defined and CHOSE to do. Whether it was pursuing creating a new business, or writing a book, or growing flowers to sell at a roadside stand. The point being, it would be our choice HOW and IF we worked. We knew it would mean being able to travel extensively, even living part time in different places around the world. We knew it would involve building a dream house on our family’s land – and we talked about the size of that house, and how much we thought we would need to have to pay for that dream house. We made an exhaustive list of what retirement would look like for us in an ideal world. Then we set goals to try to make it happen.
Set Your Retirement Goals
- Set a retirement age goal
- Determine how much you will need annually to be able to retire at that age (we used personal experience, and a few tools to determine this. Personal Capital has a great retirement planner).
- Within this, you will need to understand your typical yearly spending (hopefully you are budgeting and keeping track so you have at least a ballpark figure for this).
- Factor in things like social security, any pensions (we are military so this was applicable)
- Also factor in major life events like your kids college tuitions
- Assess your current savings contributions, and determine if you are on track to be able to retire at the age you’ve set as your goal. (This is where the retirement planner comes in handy).
- Make the adjustments to get on track to reach your goal. This may mean finding ways to save more and/or spend less. It may mean figuring out how to maximize your current income. It may mean looking for other income opportunities. It may mean reevaluating your job and considering others that would help you reach your goal faster. It may mean selling the brand new car you just bought in exchange for an older one in order to get rid of a car payment. It may also mean you need to find ways to create passive income streams so you will continue to have money coming in even after you have quit working.
The point being, set a goal, assess your current path, and make the adjustments to get there. Don’t think of retirement as a “some day” thing. Thing of it as an achievable, real thing within your reach, and get aggressive about making it happen.
TRACK YOUR PROGRESS
It’s important to keep a finger on the pulse of your overall financial health and position. We love using tools like Personal Capital to track all of our accounts in one location so we can clearly see our debts and our assets, and know our overall net worth. This is the number that really matters because it is what you have left over once all of your debts have been deducted.
Personal Capital also has a retirement planner that allow you to set goals, and include life events like sending your kids to college. It does a great job of helping you understand what you need in order to retire when you want, track your progress towards those goals, and make adjustments as needed. It can even suggest adjustments and options to help you improve your progress or get you on track.
Next we’re going to discuss the various options you have for savings, retirement, and investment accounts.