The key to financial freedom

It's been a crazy couple of months for me. Since April, most of my time has been dedicated to selling our condo and buying a new home. Now, at last, the turbulent times are almost over. Kim and I closed on the condo last week, and we'll close on the “country cottage” next Monday. On July 1st, we'll move to the new place and a new chapter of our lives will begin.

As some semblance of normalcy returns to my world, I've been sorting through my Money Boss inbox. I love reading what you folks write to me (even if I don't always respond!), especially when you share your goals and dreams for the future.

Debt is Slavery

For instance, here's part of a message from a woman we'll call Irene. Irene recently experienced an epiphany:

I see my parents, both of them tired and still worrying about the money. I see people in my country, counting days to retirement yet dreading the date like it's some kind of an invisible curse that cuts off their pay by a large margin they now have to live with from month to month, even asking for a federal support to make the ends meet. I see young people whose potential is squandered just because they are slaves to the system they were told about — go to school, finish it, find a job, work your part until retirement, and then, if you're lucky, you have ten to twelve years to enjoy…probably.

I see all that…and I want more out of my life than simply be a part of a rat race we all are invariably losing. I want to be that girl who dared to dream the impossible and then realized it.

I love it! It's email from money bosses like Irene that keeps me motivated to continue doing the work I do.

In this case, Irene's message struck a deeper chord with me. It reminded me of my own struggles with money.

When I was younger, I lived paycheck to paycheck on an average salary. I was deep in debt. I had no savings. I spent every penny I earned. Like many folks in similar circumstances, I felt chained to my job. I felt like I had no options.

Debt is slavery,” argues Michael Mihalik in his book of the same name. “You drag yourself out of bed and go to work because you have to.” You have a mortgage, a car payment, credit card bills, student loans, and other financial obligations. If you don't go to work, if you don't keep earning money, you risk financial ruin.

Most people believe this is simply how life works. It's the price you pay to live in a modern society. And because most people allow themselves to accept these financial burdens, they're chained to their jobs. They lack freedom. They're unable to take risks.

But most people aren't money bosses. You are.

The Key to Financial Freedom

Because you're a money boss, you recognize that it's up to you to escape the chains of debt. You know that the key to financial freedom can be found through a simple concept: profit margin, the gap between what you earn and what you spend. And the best thing about profit margin is that it buys you freedom both today and tomorrow.

  • The greater the gap between your earning and spending, the more freedom you have today. This profit margin gives you power — power to make choices that might otherwise be unavailable to you.
  • At the same time, profit gives you greater freedom tomorrow. When you earn more than you spend, you're able to set aside savings. This savings — your accumulated profits — grants you a wider range of options in the future.

The more money you save, the more freedom you have, and the greater risks you can take. As your financial independence increases, you chip away at the wall of worry. You're able to make decisions based on happiness rather than dollars.

Remember my roadmap to financial freedom?

[The Stages of Financial Freedom]

A lot of folks think financial independence is a fixed point. It's not. Financial independence is a process, with different stages along the path to complete freedom. As you reach each stage, it's as if you've gained a key to unlock another chain that has tied you down.

When you reach solvency, for instance, you obtain the key that unbinds you from depending on others for financial support. When you reach stability, you unlock the chains of consumer debt. When you reach agency, you're no longer shackled to your job. And so on.

This is not just theory. This is how money works — not just for me, but for you as well.

Buying Freedom

My inbox is filled with examples of folks who have managed to shed their financial shackles to one degree or another. For instance, another money boss — let's call her Marie — wrote to say that she's in a precarious position at work. There's conflict, and she's worried about her job. But because she's managed to boost her income while trimming her expenses, she's less worried than she might have been in the past.

This is a terrific real-life example of the security that comes when your work as a money boss comes to fruition. If she were in debt and/or spending exactly what she earned, Marie would feel stuck in a job that's causing her stress. But because she's paid off her debt and has accumulated some savings, the work conflict isn't as scary. She knows that if she leaves her job, she'll be fine for a while. She's bought a degree of freedom.

No matter where you are on the road to financial freedom, I urge you to continue making smart choices. Remember to manage your life like a business. Ruthlessly guard against unnecessary expenses. Boost your income whenever possible. Never forget that your goal is to remove the chains that hold you back, to gain the freedom to do and be who you choose.

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Mrs. Adventure Rich
Mrs. Adventure Rich
3 years ago

After hearing your interview on Paula Pant’s Afford Anything podcast, I continuously come back to your “Road to Financial Freedom” Stages. They provide an excellent framework and have helped Mr. Adventure Rich and I to keep on track and reach for the next “stage”.

Thank you for the great reminder, I am already thinking of a few “smarter choices” I can implement today!

Lance @ My Strategic Dollar
Lance @ My Strategic Dollar
3 years ago

Agree with this! I think your framework is wonderful for those who are new to the process to become financially free or those that just need a quick refresh.

Jason
Jason
3 years ago

Moving from step 3 to 4 seems to be the tricky bit, unless you are willing to forgo health insurance. How much money will I need next year for my family if we don’t have employer provided health insurance? No one knows.

Beth
Beth
3 years ago

I can relate to Marie! I work in tech, so it’s not unusual for companies to face troubled times and re-structure. When I was an intern, one of my coworkers told me “if you want to work in this industry, you should set aside 6 months worth of expenses”. Layoffs, she told me, were normal in this climate. Indeed, quite a few of my talented, well-adjusted coworkers had faced a lay off at one point. While my parents had always taught me to “save for a rainy day”, her advice did two things: 1) it gave me a SMART goal… Read more »

Shara G.
Shara G.
3 years ago
Reply to  Beth

There were 2 main employers in my town when I started working here. A lot of people at my employer complained about how much they could make at the other employer. I pointed out the layoff cycles and people were frequently out of work for a couple months at a time every couple years. If you are out of work 20% of the time you need to make about 20% more when you ARE working. I personally never thought more money was worth it. I stayed at the lower paying employer. Worrying about finding a new job never sounded fun… Read more »

Emily C
Emily C
3 years ago

This is such a true statement. Debt is slavery! The worst part is when we get ourselves into debt for stuff we won’t enjoy for more than a minute or two. I’m a stay at home mom (3 boys) and piano teacher, and my husband finished grad school only 3 years ago. Because we inflated our lifestyle only a tiny bit when we moved from grad student stipend to a real job making 7 times more money, we have in 3 years: Paid off $128K in debt Taken our kids to Europe for 5 weeks (family hostels are real cheap!)… Read more »

Mr. Hammocker
Mr. Hammocker
3 years ago

Debt is another form of bondage. People assume that debt is normal. They don’t realize they are slaves to their debt! When one becomes debt free, they understand the difference. The stress of servicing all of the debt is no longer present. Great article. Helps us remember the basics.

Lance @ My Strategic Dollar
Lance @ My Strategic Dollar
3 years ago

Debt sure does shackel you. Love the part about the difference between your income and expenses being your freedom today.

Aime Lopez
Aime Lopez
3 years ago

Great article, it helps to open our eyes… I have been reading and reading about financial freedom and found these two pages that are awesome, hope you like it:

https://www.thevenusproject.com/

https://thezeitgeistmovement.com/

I started to be a money boss and a minimalist since 2013 and I feel less stressed and relieved that I can leave my job without worries any day… 😉

MWM @MyWealthManifesto
MWM @MyWealthManifesto
3 years ago

Your comment about profit margin couldn’t be more true! Too many people think that becoming financially independent means having to save millions of dollars or earn more money. But really if you can focus on the gap between what you have and what you spend, you might find out that you’re already there.

Dora
Dora
3 years ago

I still work for a living but I feel a tremendous sense of financial freedom. I paid off my home mortgage 12 years ago and continued to live below my means even when I was earning big money.
I now work a very low-stress job, where I work from home several days a week. It pays less but I have great benefits. The work/life balance is great and I have job security.
It doesn’t get better than that.

sagar nandwani
sagar nandwani
3 years ago

The road to financial freedom begins not in a bank or even in a financial planner’s office like mine, but in your head. It begins with your thoughts.

ai
ai
3 years ago

I love this article so much, I shared it with my dentist friends. I thought it would open their “eyes” .. What I gotten back are responses like “stage 3-6 is impossible” or ” i have problem with stage 3″ or “i will never get out of stage 2” . So much resistant !
Anyway, I’m killing my debt and try to invest with the cash I save up

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