It’s safe to say that different people will define financial freedom differently. It’s also safe to say that at its core, the notion of having freedom financially means an ability to be free from responsibilities of which (if you had your way) you would let go.
If asked, many people would say that financial freedom is being free from debt. Others might assume it means having a fat bank account or having the means to retire early. My favorite definition of financial freedom is having enough to do what you want to do, when you want to do it … so for the context of this blog post, let’s define financial freedom as not just freedom from work, but instead it simply means, freedom of choice.
From the time we are little, and as we grow up, America provides both inspiration and headwinds that can stir the pot of your financial future. Reaching your goals are in no way assured and you really have to have your priorities and head on straight in order not to get turned around by misinformation, and widely held beliefs that are not true.
It’s with an eye of healthy skepticism that I have written about these 3 financial freedom myths, and how you might avoid the pitfalls of believing them at face value.
These myths are:
- Saving is enough to make you wealthy.
Penny-pinching is a useful tool, no doubt. If anything, most financial advisors would tell you it’s a good starting point. However, saving alone is not necessarily what gets you the independence and wealth you are seeking. By the way, being frugal doesn’t mean that you have to be cheap either. Instead, it only means that you focus on ensuring you get the best value for your money. This takes commuting to a plan. Take time and actually sit down to write out your goals and the activities you need to reach those goals.
If you do your research, you’d realize that this is also a common characteristic among the most financially successful people. They are usually very value oriented; they know how much things cost. They respect money and worth and recognize the difference between the two. A lot of people struggle with saving for the future, but it does not have to feel restrictive or a chore. There are many finance apps now to help you put aside money to savings in a way that is less painful. Consider how a side business or investments can boost your finances at the end of the day.
2. Avoid debt.
It is a story as old as the Sphinx; staying debt free will help you stay on top of your finances. This is generally not a good rule to build your financial strength overall. Borrowing purchasing power (or leverage) has proved to be a powerful financial tool for most Americans. The ability to take on debt, and pay back your credit, loans and interest, shows that you are responsible with money. This behavior over time will give lenders and sellers of property the confidence that you are a safe investment for their money. This means your ability to make large purchases goes up … ultimately leading to more choices in your life. The problems with debt arise when you abuse that future credit worthiness, by not being able to pay back the lender in a timely fashion.
How many times have you heard of friends, family members, or celebrities who have fallen into a consumer debt hole or lost their nest eggs due to legal judgements against them? Well, all the negative experiences you may have seen should be water for your “will not make the same mistake” money tree. When used wisely, debt can help you amplify your business or investments. Debt is like fire; It can help you get cooking, but just watch it or you will be gnawing on something burned.
3. Homeownership is a crucial part of building wealth.
Many people would love to own their own home and think that that is the best way to build wealth in America. This is true in a lot of cases, but the financial crisis of 2008 and the recent natural disasters all over the country (like floods, wildfires, hurricanes and tornadoes) has given many people a sobering look at what used to be called the American Dream. I’m sure “The Dream” still exists, and there are tremendous benefits to homeownership, but that one size fits all rule is slowly becoming a myth too. Today, owning a home depends greatly on where you live; how affordable are home prices in your area?
Additional questions you should ask yourself before buying a home are:
- Can you afford the mortgage, utilities and fees?
- What are the tax implications for you once you buy a home?
- How long do you intend on staying there?
- Will you live in the house or is this an investment?
- What is the potential of economic growth of the community?
- What are the available rental options in the area?
- Are you single or married?
- Do you have children?
- Do you have special needs family members?
- Will you need space for an older adult?
- Do you commute to work?
- Do you own a vehicle?
- Do you have pets?
The decision to buy a home may actually be more complicated than you first might think. Remember, it’s not just a matter of owning your own home, it is also about everything that goes along with it. Owning a home doesn’t necessarily mean that you are financially free. If you’re not careful, instead of being in the middle of your new beautiful home hot tub, you may find yourself in the middle of a tub of a financial hot mess.
Choice. Choice in life is the key determination of whether you are truly rich. How you get there can take many different avenues. In order to have the freedom to choose, your first choice must start today. Choose to discover more about yourself and what makes you happy and what you will invest your time and money towards. Make a plan … write it down and make steps to reach those goals. You have to free your mind first, before you can be financially free.
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