It can be easy for us to get caught up in the busyness of life. We are so focused on progressing in our careers that we may lose sight of the main reason(s) we are working so hard in the first place. When you reflect on some of the biggest financial benchmarks you want to accomplish, what comes to mind?
Some people want to pay off their student loans. Others want to be completely debt free. Some people want to buy their dream home, others want to fully fund college for their children. Before you hire a financial advisor or start investing money in various places, figure out what’s most important to you and create a specific plan to meet that goal.
Do you want to pay off your student loans? Doing so may require you to live below your means for the next 5 or 10 years so that you can increase your monthly student loans payments and lower the loan balance quicker. If you work in a non-profit job that qualifies for loan forgiveness, you may want to make sure you’re enrolled in an income-driven repayment plan so that your student loans payments are lowered to an amount you can actually afford. If your job doesn’t qualify for federal loan forgiveness and you have already refinanced your loans with a private company, perhaps you should see if your job would be willing to pay down some of your student loan debt directly – some professions may use this student loan payment as a type of salary bonus. Regardless of the route you take, if being student-loan debt free is a goal, you may want to think of ways to pay it off within the next few years and align your financial priorities to meet that goal.
Do you want to purchase your dream home? For many young professionals, buying a home is the ultimate sign of adulting. This desire to have a place of their own intensifies when young professionals reach their early to mid 30s, get married, or become more settled in their careers. If you desire your own place as well, perhaps you should meet with a specialist at your bank to see if any unique mortgage programs are available to buyers in your profession, income bracket, and geographic region. You may be surprised at the options mentioned. Along with seeing what’s available, you should also re-shift your focus to saving a larger amount of money in your savings account than you otherwise would. Having this money available will help you pay for the house down payment, closing costs, moving expenses, and other associated home-buying fees.
Do you want to retire early or work part time? Many people who like their careers may decide that other things are more important to them. Perhaps they enjoy their work but want to be able spend a little more time at home with their children. Maybe they want to cut back to part-time. Other people may choose to retire early and do something else altogether. If working less or retiring early is one of your goals, then it may require you to invest aggressively in retire accounts from a very early age. While some people may only contribute 10% of their salary to retirement, you may want to double or triple that amount. Perhaps you should consider maxing out your work retirement account then setting up additional taxable accounts to invest even more money. My point? If you plan to retire soon or work part-time, you will likely need to invest more money toward retirement from an earlier age so that you can let the magic of compound interest work in your favor and actually afford to make that change in your career.
Do you want to pay for your kids’ college? Perhaps you are someone who would like to finance your kid’s educational costs. Because the cost of college has continued to increase over the years, paying for an undergraduate education can be quite expensive. Many parents who plan to pay this cost end up saving/investing money for many years in a 529plan that saves them money in taxes. Other parents may opt to save money in a Roth IRA, set up a custodial account for their kids, or purchase educational bonds. Regardless of which method you choose, you will likely need to save money each month which will require you to think over your monthly income to see just how much you can afford to spare in order to stack up enough money over time to cover the cost of college.
Do you want to be completely debt free? Many people are risk averse and hate debt. The thought of owing someone, or some financial institution money, bothers them and adds bills to their monthly expenses that decreases the amount of money they can spend on other things they enjoy like travel, entertainment events, and fancy restaurants. If you feel similarly, and would like to get rid of all of your debt, doing so may require some changes in your finances. Perhaps you need to decrease the amount you contribute to retirement investments and instead pay down your credit card debt and car loans more aggressively? You may also need to learn to save aggressively and pay for everything in cash instead of credit.
My point? Many of us have financial goals we would like to accomplish. Achieving these goals may require some sacrifice and a shift in how we think about our money. It may also change how much we invest for retirement or spend on various debt repayments. Think about what is most important to you financially and make the necessary shifts in your finances to bring these goals into fruition.
Think twice before you buy individual stocks
I don’t actively trade or buy individual stocks, much to many of my friends’ surprise. I mention several reasons why in another blog post, but the main reasons are that:
It takes a lot of work to try to do it correctly
Accurate, timely information on individual companies can be difficult to find
It requires a substantial amount of research on various companies and industries.
The market is volatile and the purchase of individual stocks is too risky
I keep my investing simple by purchasing well-diversified index mutual funds. The index funds lower my risk of losing money and increase my chance of making money. They also increase the odds that I will make a substantial return on my investments over time.
However, I had a few people reach out to me and question this strategy. They asked “if investing in index funds means you purchase all the stocks, then that means you own both good companies and bad companies. Why not just purchase all the good companies individually?”
My answer was that “It’s not that simple.” Let me explain why.
Good company does not mean good stock. In other words, just because you hear of a “good company” like Apple or Microsoft that does not mean buying stock in that company will make you money.
You make money by purchasing stock in a company and having that company’s stock increase over time. Unfortunately, even if a company is good and profitable, that does not mean buying stock in that company will make you money over time.
A company’s stock price is not determined by that company’s value. Some well-run companies can have low stock values and some poorly run companies can have high stock values.
Stock prices are volatile and change quickly based on a variety of factors. If investors think an industry will do poorly over the next few months, their stock price may go down, even if the company itself is doing very well. If investors think a company’s stock is overpriced, they may start to sell that stock which may drive the price down, even if the company itself is still doing well and making huge profits.
Plus, even if a company is doing well and its stock price has increased recently, that does not mean its stock price will continue to go up in the future.
Sometimes a bad company can have its stock price go up (making you money) and a good company can have its stock price go down (losing you money).
It’s hard to predict what will happen.
Picking the right stock relies too much on luck. It is not dependent on skill, intelligence, having the “right” advisor, or extra knowledge. Because it’s so hard to know which companies will have stock prices that will go up over time, buying individual stocks is like gambling in a casino. Although you hope to make money, you can’t predict what will happen. Even if you got lucky and made money initially, that does not mean you will continue to be lucky and make money in the future.
It’s too risky. I’m not sure about you, but I don’t like to lose money. I want to invest in a safe way that will still give me a good return on my investment over time.
I invest in index mutual funds. By purchasing funds like the Vanguard Total Stock Market Index, I am nearly guaranteed to make about 8-10% profit on my money each year. Each year, this return on my investment will continue to increase and compound. This will build my net worth.
5 basic truths about Money and Happiness:
Jonathan Clements in his book How to Think about Money mentions 5 truths about money and happiness that I found particularly enlightening:
“Money can buy happiness, but not nearly as much as we imagine”
When I was in medical school living off of student loans, I didn’t have lots of money. I barely had enough to make ends meet and although I was relatively happy with lots of close friends and family support, I always believed that I’d be even happier if I had more money. Clements, in his book How to Think about Money provides some insight on this idea. He attests that although we can use money to increase our happiness, we can only do so up to a certain extent. A certain level of money will allow us to live more comfortably. We won’t have to worry about paying our bills. We can live in a nicer area, afford meaningful trips with our loved ones, and can purchase more of the things we like. However, that increase in happiness only goes so far. Although our happiness can increase with more money, it usually doesn’t increase to the level that we anticipate.
“We place too much value on possessions and not enough value on experiences”
Many of us have, at some point in our lives, thought that if we had more money we could afford the thing(s) we want. While that may be a true statement, Clements, warns us against this type of thinking. Many of us overestimate how happy we will be when we purchase certain things. Unfortunately, any increase in happiness we get from purchasing a material possession is usually short-lived. To find more lasting happiness, Clements’ suggests that we focus more on experiences. Whenever we spend money on an experience, like a trip overseas, a visit to family, or a getaway vacation with our friends, we have much more happiness and it tends to last longer. We have joy in anticipation of the experience, happiness during the experience itself, and also have fond memories after the experience has ended that tend to get better with time. This is why Clements suggests that if we have extra money, we should forgo buying material things and instead opt for more experiences.
“Spending money on others can deliver greater happiness than spending it on ourselves”
Ironically enough, when we use our money on our ourselves, we get less happiness than if we were to use the money on others. It sounds odd, but many people find that they have lasting joy when they do things for other people. It’s as if knowing we have helped someone else makes us think more positively about ourselves and the kind of person we are. The idea of being a kind and doing something to enhance someone else’s life brings us joy that lasts a lot longer than the temporary happiness we may get from buying ourselves something. Giving is one of the key ways to achieve lasting happiness.
“We adapt quickly to both good and bad developments in our lives.”
This quote may seem a bit odd but has a lot of truth. As humans, we are great at learning how to adapt. Life circumstances may change but we change and adjust accordingly. Although our mood may sway from time to time, the majority of us, have a natural inclination to adapt. Our flexibility is good for survival but can really make us scratch us our heads in regards to money. If we are living in poverty, living with less may bother us initially but we quickly learn to adjust to our life circumstances and find some sort of happiness, even while working harder to improve our finances. In contrast, if we find ourselves in a position where we are upper class, making more money than average, we adjust to that as well. Clements’ point is that our life circumstances, and “becoming rich” won’t give us the long-lasting happiness we may expect. The key, he states, is to focus on intangible sources of happiness like family, experiences, and giving to others.
“Happiness depends on how we stand relative to others and we each have genetic ‘set points’”
Another truth in Clements’ book is that our happiness is shaped by our comparisons. If we are doing the same as, or better than, people around us, we tend to feel much happier about ourselves. However, if we are doing worse than those with whom we compare ourselves, we tend to be less happy. Our baselines degree of happiness or “set point’ is based on genetics and how we were raised. If we come from an optimistic happy family, we tend to be happier at baseline than others. The point is to be mindful of your happiness set point and increase your happiness by refusing to compare yourself to others, especially to those you perceive may be doing better than you.
3 Ways I Increase my net worth each month
Our net worth is an important financial number. It’s the value of our assets (things that increase in value) subtracted from our liabilities (expenses and debts we owe). The higher our net worth, the more financial security we have. Increasing our financial security gives us more freedom to do the things we love and live the life we desire. It means we can retire from our jobs early or work fewer hours if we want. We can spend each day doing what we love and can easily sell our assets to generate more revenue and money if needed. Because I want this level of freedom in my life, increasing my net worth is a continuous goal. Here are the 3 ways I’m doing that:
1. Investing money in my retirement account. As a physician who is employed by a large academic institution, I have the option to invest in employer-sponsored retirement accounts. Since I work for a non-profit hospital, I have access to a 403b which is quite similar to a 401K. Through this type of retirement account, I can invest money for the future which increases my net worth. Each month I put 10% of my income into my work 403b and invest the money in this account in index mutual funds, which are low cost funds that purchase a variety of stocks and bonds. Money in these index funds earn an average return of 8% per year. This means that each year I invest money, I earn about an 8% profit on my investment and that interest compounds each year as I continue to contribute money in the account. With an average interest rate of 8% per year, my money increases in value annually and doubles every 9 years. Putting pre-tax money from my salary into retirement accounts that are invested in low cost index mutual funds is one of the best ways I increase my net worth each year. The fact that these investment contributions also save me money in taxes each year is a bonus.
2. Paying down debt, early. Most adults have some form of debt, whether it’s a credit card balance, car loan, or home mortgage. This debt is a liability that subtracts from our net worth. Although many of us are fiscally responsible and pay a portion of the debt down each month, one of the things that has increased my net worth even more over recent years is paying the debt down sooner than required. In other words, instead of making the minimum payment, I pay more than what is required each month. Simply paying the minimum will cause me to pay extra fees in the form of interest and takes away money I could be using to invest or spend on other things. Paying more than the minimum each month, and eventually paying off the debt early, decreases my liabilities. As I mentioned earlier, decreasing liabilities increases my net worth.
3. Saving money in a separate account. One of the major ways I increase my net worth is by saving money. Although it’s sounds simple, it’s easier said than done. I’ve learned that unless I’m intentional about saving money, I’ll inevitably buy extra clothes or shoes I don’t need and find myself wondering why my bank account balance is near zero at the end of the month. One way I avoid overspending, is by saving money in a separate banking account. I have a certain “savings goal” each month and to ensure that I achieve that goal, I have a certain percentage of my paycheck that is automatically deposited into a separate account on the first of each month. Since this account isn’t connected to my debit card or credit card, it’s almost impossible for me to spend. Since I can’t spend it, I save it, and as a result, the value of my savings increases each month. As my savings increases, my net worth increases.
Although each person is different and may have various other financial priorities, we can all increase our net worth through at least one of these ways. Tell me, which method have you chosen to focus on to increase your net worth?
Your living situation can affect your net worth, here are things to keep in mind:
As we continue to grow and mature, our living situations may change. Some of us may go from living in college dorms to moving into our first apartment. Others of us may go from sharing apartment space with a roommate to buying a house with our spouse. As we progress through life and make these changes, we must remember that our living arrangements can impact our finances and overall net worth. Here are some things to keep in mind:
1. Be weary of buying a home that’s too big. As someone who relaxes by watching HGTV, I love looking at nice houses. Many of my physician colleagues live in mansions and I marvel every time I walk into their homes. Although it’s perfectly fine to want to purchase a home, think twice before getting one that is too big. Despite how much the bank may lend you, there are lots of other costs associated with buying and up keeping a home that can add up to quite a lot. For example, a larger home usually comes with a higher mortgage payment, higher yearly property taxes, and high insurance costs. These expenses can prevent you from being able to save or invest money at an optimal rate. Plus, a larger home and more space, means that you need to furnish more rooms and purchase more items fill up that space. With more expenses come less savings and less saving/investing can severely impact your ability to increase your net worth.
2. Be weary of an apartment/home that’s too expensive. Similar to not purchasing a home that’s too large, also be careful not to rent an apartment that’s too expensive. In most cities, there are apartment homes that are fairly cheap, reasonably priced, and extremely expensive. Be careful of the later. It can be tempting to rent a place in the middle of the city with the high-rise apartment, scenic views, a rooftop pool and modern amenities but be mindful of cost. I know many people who rent apartments like these which costs them almost 3 times as much as other apartments in the same city and are over twice as much as the average mortgage price in their area.
While it’s okay to “pay for convenience” be mindful that doing so may preclude you from being able to spend money on other things or save the down payment needed to purchase a home, pay off your student loans at a reasonable rate, invest money for retirement, or take the types of vacations you’d enjoy. The general rule of thumb is to not spend more than 30% of your gross (pre-tax) income on housing. While that may be quite challenging for those who live in high-cost-of-living areas like Seattle or New York, it provides a general framework we can use to determine which apartments we should think twice about renting. Although most people sign leases for 1 year, committing to such a huge fixed cost can be a financial catastrophe if our income changes, the coronavirus pandemic has made this even more true.
3. Be weary of a work commute that is too long. Along with the size and cost of our housing, we also need to be mindful of the distance our home is from the places we go to most. Having an affordable place an hour away from our job might save us money in rent but cost us a lot more in gas and car maintenance. It may also take away valuable time we could spend with our families or decrease the time we could spend working on other side projects that could help us bring in even more money. Jonathan Clements’ in his book How To Think About Money, mentions that long work commutes can be one of the main things that actually decrease our overall happiness in life. This suggests that finding housing that is too far away from our jobs can even affect our mental health and well-being.
4. Consider a roommate. Those who are single might want to consider having a roommate. Although this can get a little challenging as we age and begin to want our own space, it is something I urge everyone to think about, especially if they are still young and unmarried. Having a roommate will allow you to split the rent and will cut all of your other housing costs in half. Although having to share an apartment with someone else can be inconvenient at times ask yourself if you this inconvenience is worth saving an extra $500 to $1,000 per month. For me, it is. I’m a resident physician who lives with a roommate.
I share an apartment with one of my co-workers. We each have our own bedrooms and bathrooms but share a common living room and kitchen. Since we both work 60 to 80 hours a week, we are rarely in the apartment at the same time which makes things a lot easier. Plus, sharing this space allows us to split all the bills and saves us each over $1,000 per month. With this extra money I’m saving, I’ve been able to invest a lot more towards retirement, put away cash in an emergency fund, and save money to go on international vacations. Having a roommate is one of the best financial decisions I’ve made as a resident.
5. Consider house-hacking or renting a room. For those who have a spouse or may purchase a home soon, consider house hacking. House hacking is when you rent out part of your house to another person. Typically, this is done when people buy a duplex or a multifamily property with multiple units or apartments. They may live in one of the apartment units on one side of the duplex and rent out the other side. This is more ideal for singles or young couples who prefer their own living space but still want to save some money on the rent or have some additional income coming in on the side. Other people may decide to buy a place that has an extra bedroom and rent out that room during certain times of the year for a few weeks at a time. While this may not be ideal for everyone, it may be a good option for those trying to find ways to decrease their housing costs.
6. Consider a rental property. For those who live in single-family homes with their spouses or who have their own place and love their person space, another option is to consider a rental property. Perhaps there is an affordable home in your city you could purchase, fix up, and rent out to others. Maybe you already have a home but are thinking of purchasing a newer one to have more space for your growing family. Instead of selling it, consider renting it out to someone else. Renting out a home can be a great way to build wealth since it allows you to use the renter’s monthly payment to pay off the mortgage and save a portion of the leftover money for yourself. There are lots of other responsibilities associated with becoming a landlord, but this process may be something to consider.
My point? Our living situations can affect our finances in a number of ways. We should be careful of buying a home that is too large, renting a place that is too expensive, or finding housing that is too far of a commute to our jobs. We should also consider living with a roommate, house hacking a duplex, renting out a room, or purchasing a rental property. Tell me, what living arrangement do you have currently have and how do you think it’s impacting your finances?
5 Things I learned After Paying Off My Credit Card Debt
1. It is much easier to get into debt than it is to get out of it. I racked up a significant amount of credit card debt during my years as a graduate student. I moved to a city I couldn’t afford, accepted a job that didn’t pay well, and used credit cards to make up the difference. Needless to say, I accumulated debt pretty quickly. It’s not like I was “balling out of control” taking fancy vacations or living some lavish lifestyle but the cost of basic expenses in a high-cost-of-living area took its toll. Although it was fairly easy to rack up this debt, I had to make some hard sacrifices to pay it back.
2. Paying off debt takes a lot of sacrifice and behavior change. I delayed paying off credit card debt when I got into medical school simply because I couldn’t work during that time and was already living on student loans. Once I graduated and started working as a physician, paying down that debt was one of my top priorities. The interest rate on my credit card was about 12% and although that’s great for a credit card, the longer I kept this debt the longer I was going to be paying at least 12% more for the things I purchased years ago. In order to pay it off as soon as possible, I literally threw money at this debt. Each month for the first 6 months I was a physician I had a chuck of money automatically sent to the credit union that issued my credit card. Every month I saw money that I could have spent on a nicer apartment or a fancy vacation go to pay back debt I had accumulated well over 6 years ago. I was jealous of my classmates who ate at restaurants all the time or were always traveling to nice places when I was essentially living like a broke college student trying to back this debt. Trust me, it was tough.
3. The temptation to avoid paying it off can be hard to resist. There were so many times where I’d want something (like a nice lamp for my apartment, a fancier bed spread, or a newer cellphone) and I realized that I could probably purchase those things easily if I didn’t have so much money going toward paying off my credit card. I contemplated delaying paying off the card by a few months in order to experience some gratification now. While doing so may not have totally derailed my financial goals, it would have created a dangerous habit that could cost me even more down the line: delaying debt repayment to purchase material things. I’m a firm believer that the habits, mindset, and discipline needed to pay down debt are the exact same traits needed to save, invest, and build your net worth. Delaying gratification is never easy, but learning to do so had such a positive impact on my finances and ability to build wealth.
4. The debt was costing me more than I realized. I decided to prioritize paying down my debt because I realized I was paying drastically more for things that I purchased years ago. In other words, the credit card company was charging me monthly interest of over 12% per year on the total balance of the card. The longer I delayed paying it off, the longer I would be paying interest. When I started learning more about personal finance, I realized the debt was costing me even more than extra interest payments. It was also delaying my ability to build wealth. Every dollar I was spending on this credit card debt, was a dollar that wasn’t going into retirement accounts to be invested in a way that actually earned me more money. Instead of EARNING 8% per year on money invested in retirement accounts, I was actually PAYING 12% more on debt. The sooner I paid off this credit card, the sooner I could get more money invested and start earning interest instead of paying it.
5. Paying down the debt improved my quality of life. Now that I’m credit card debt free, I’m so much happier. I no longer have a large chunk of money going toward a bill I accumulated years ago. Instead, I’m investing more money into retirement accounts and saving more money in my emergency fund. I’m also planning a couple international vacations that will be paid for in cash. To be able to live my life without relying on credit cards is such a freeing feeling. Plus, it took so much sacrifice to get it paid off that I literally never want to go back.
One of the best decisions I’ve made: automatic savings
When I graduated from medical school, one of the best things I did was set up automatic savings. I made a budget that had about 25% taken away in taxes, decided to live on 50% of my income, and made the bold move to have the remaining 25% placed in an entirely separate account. This account was reserved for building wealth through saving, investing, and paying off debt. It was one of the best things I did and here’s why:
1. It allowed me to grow my emergency fund. One of the best things about having part of my paycheck go into an entirely different bank account was being able to save money in a separate place. Because the money in this account isn’t connected to my checking account, I couldn’t spend it. Month after month, the money just kept adding up and before I knew it, I had saved thousands of dollars in an emergency fund. I remember looking at the account 6 months after I started saving and being so proud of myself. It made me even more motivated to keep saving. Plus, it gave me a sense of relief to know that I money to cover unexpected expenses.
2. I started investing early for retirement and building my net worth. Another awesome thing about automatic savings was that I was able to start putting money into my retirement account. Unlike money sitting in my savings account, the money I had automatically deducted from my check for retirement was being invested in a way that would make me even more money in the future. Although retirement may be decades away, I need to start saving and investing now in order to have enough money in those accounts to cover all of my needs. I don’t want to be relying on social security checks from the government trying to make ends meet on a small sum of money when I’m in my 60s. I instead, plan to invest the money now in a way that would allow me to live the life I want free from financial burdens.
3. I paid off a lot of debt. Regardless of whether you hate debt or don’t mind it, paying it off can feel like a weight lifted off your shoulders. Although I entered a loan forgiveness program for my student loans, I still had other credit card debt I needed to pay back. Unlike most people who go straight into medical school from undergrad, I lived in Washington, D.C for two years before starting medical school. Although that time was rewarding, I racked up lots of credit card debt. (The city was super expensive, and I used credit cards to cover some of my bills since my salary was low) By the time I left the city, I had thousands of dollars of debt to repay. When I got my first job as a doctor, I had hundreds of dollars automatically withdrawn from my separate account each month to pay off this debt. By the end of my first year as a doctor, I was credit card debt free! Now, instead of spending hundreds of dollars on a credit card payment each month, I’m able to invest even more money towards retirement and raise my net worth.
4. I now have money for vacations, Christmas gifts, and other indulgences. Along with investing for retirement, building my emergency fund, and paying off debt, having a portion of my check automatically sent to a separate account also allowed me to save money for things that bring me joy. I now have some money in a “vacation fund” so I can take trips and create memories with friends without racking up debt. I have also been able to save money each month for Christmas gifts so that my spending in December doesn’t put me in a financial hole for the next year. Plus, I have money saved for expensive purchases like a new phone or laptop should I need it.
5. I learned how to live below my means. I think this is by far the most important lesson I learned. As a physician, my life is a little different from most. I spent many years in school living off of student loans, and now must spend a few more years in residency where I’m paid a low salary by the government. However, once I finish residency, my salary quadruples. It’s an interesting timeline. Since there’s so much hard work and delayed gratification involved to get to the end goal, it can be very tempting to “not worry about money” and simply get what I want because I know that eventually I’ll be able to afford it. Although this seems fine, many people with this thought process inflate their lifestyles by too much, rack up lots of debt, and are unable to retire when they’d want to because they didn’t save enough money earlier on in their lives. I don’t want that to be me. Learning to live below my means has taught me to be less materialistic, more giving, and more appreciative for the things I have. It has also helped me learn to be humble and not to compare myself to other people. In other words, living below my means helped make me more mature.
My point? As you can see, automatic savings in a separate account has had many benefits on my life. Although it can be difficult to live on half of my paycheck while others seem to be living a much more lavish lifestyle, I realize that the sacrifices I make now will pay off in the end. Practicing self-discipline by saving money, is one of the best decisions I’ve ever made.
4 Reasons You Should Choose Financial Independence
Financial independence (F.I.) is when you have accumulated so much wealth or resources that you are no longer dependent on your job for money. While some people may feel like financial independence is an unrealistic pipe dream, I’d argue that its possible for many of us and definitely something we should all strive for. Here’s why we should all care about and choose F.I.:
1. It can decrease [financial] stress in your life. Although money can’t “buy happiness” a certain baseline level of resources can certainly decrease stress. Many Americans live paycheck-to-paycheck and barely have enough money to cover all of their monthly expenses. Others of us may be a bit more financially stable but still wonder how we will repay all of our student loan debt, afford rising health care expenses, or fully fund our retirement. These worries can cause stress and decrease the quality of our lives. Saving money from our main jobs, investing in appreciating assets, and establishing multiple streams of income can help ease this worry. It allows us to become less dependent on each paycheck and establish the financial independence that decreases these financial stressors.
2. It gives you more control over your life. Another perk of being financially independent is the ability to have more freedom in your life. When money is not the main objective, you can be more selective with the jobs you take and the work you do. You no longer have to feel burdened by the need to work a decent-paying job that you don’t like. You now have the freedom to select work that fulfills you, regardless of how much it pays. You can also have more control over your daily schedule and more autonomy with your work commitments. When you are able to work a job that you actually enjoy, one that fulfills you and allows you to contribute to society in a meaningful way, you also create more happiness that can have a lasting effect. Establishing financial independence can help make this a reality.
3. It lets you have more meaningful experiences with the people you love. One of the benefits of having your finances in order with a fully funded retirement account and little dependency on your next paycheck, is being able to enjoy your wealth. Although buying possessions and having more “stuff” can bring us temporary pleasure, lasting happiness often comes from spending quality time and having meaningful experiences with the people we love. Think about how happy you could be if you could travel to anywhere in the world with the people closest to you. Or, if you could do the thing you like most around the people you love most. Having the ability to spend more time with your children, go to work each day doing what you enjoy, visit your family and friends frequently, relax often, or travel the world can result in more sustainable levels of happiness and increase the overall joy we have in our lives.
4. It gives you the chance to have a bigger impact in the world. Although you don’t need money to make a difference, having money allows you to make a bigger impact and do so in a way that doesn’t jeopardize your own well-being. When you no longer have to make the choice between helping your family members and paying your own bills, its much easier to help others. When you no longer have to choose between financing your children’s education and contributing to charity, it much easier to give. When your financial matters are taken care of and you are less dependent on your paycheck, it becomes a lot easier to contribute to others and oftentimes you can give to even more causes, organizations, and people than before. Having the ability to improve lives and outcomes can drastically increase your own life satisfaction and create an inner peace and happiness that lasts longer than you can imagine.