Budgeting, cost-cutting, staying “lean” – all of these are ways people keep their finances in check so they can stay safe and build wealth. Some do it out of necessity, others do it because they are motivated to retire as soon as possible.
Striving for Financial Freedom is a great goal – with it comes a true sense of freedom and control over your life. It provides you with the ability to make your own decisions, not determined by financial constraints.
But there is another benefit to keeping your finances lean that often goes unnoticed, and that is the ability to stay nimble throughout your life, even prior to reaching true financial freedom.
THE PATH TOO FINANCIAL FREEDOM ISN’T A STRAIGHT LINE
It should come as no surprise that the journey toward financial freedom, and through life, is neither easy, nor is it a consistent path.
There are twists and turns you’ll never see coming, and with those twists and turns come decisions you have to make – both where you’ll go, and also what you want to do with your life.
If you’re not entirely clear about what I mean, here are a few stats to showcase how unclear the path ahead is, no matter how old you are.
Stats:
#1 – “About 80 percent of students in the United States end up changing their major at least once, according to the National Center for Education Statistics. On average, college students change their major at least three times over the course of their college career.”
#2 – The average number of jobs baby boomers held from ages 18 – 48 was 11.7. And this figure is expected to grow for younger generations.
#3 – “Only 27 percent of college grads have jobs related to their major.”
So, you can see that things don’t always go according to plan.
As the saying goes, “The one true constant in life is change.”
THE POWER OF CHOICE
So, why is this important?
The main reason I believe these statistics tell an interesting story, and why it’s a valuable concept to understand, is because as things change in your life you will be forced to make decisions at each crossroads. If you don’t have control over your finances, then it will be difficult to make choices that align with who you are and the values you hold true.
For example, maybe over the years you’ve progressed as a person and now you want to make changes in your life. Are you capable of doing so?
I know several people who have come to the realization that they don’t enjoy the job they currently do, and they’d love to make a change. But, they have locked themselves into a lifestyle that won’t allow them to go backwards in their earnings, so making the switch isn’t something they can do at the moment.
Maybe you want to move, change careers, or even take time off from work. Can you do it?
What’s holding you back?
For many, it’s their finances.
HOW TO MAINTAIN CONTROL OVER YOUR LIFE BY STAYING FINANCIALLY NIMBLE
It’s easy to say that the solution to these problems is money. If you only had more money and were financially free, you’d be able to do whatever you want.
But, for a lot of people, that point is a long way off.
As I mentioned before, striving for financial freedom is a great goal, but what about the time between now and when you attain it?
The key to having control over your life prior to attaining financial freedom is to stay financially nimble.
Here is a list of ways for you can stay financially nimble:
1 – Avoid accruing large amounts of fixed expenses.
This can be in the form of a high rent or mortgage payments, car payment, credit cards, phone bills, and more.
This first point is the bedrock of how to stay nimble. If you don’t have a lot of fixed expenses, you can more easily cut your other expenses super low if/when you decide, allowing you to chance course on a moment’s notice.
It provides flexibility.
2 – Stay out of debt.
The more debt you have, the more of your income needs to be paid to someone else each month. And even if you stop making money, you still need to pay those debt bills each month.
So, no spontaneous trips around South-East Asia for you!
3 – Avoid credit card debt
This is in conjunction with staying out of debt, but this is an especially poor form of debt, characterized by high interest payments. Along with a few others, this is an area that will do a lot of damage to your hopes of building wealth.
4 – Look for ways to have fun without spending tons of money.
Is there really nothing else to do besides go on a Yacht Week in Croatia? I feel like I’m always seeing people posting pics of this.
For sure, it looks awesome. But people were having plenty of fun long before Yacht Week became a thing.
You don’t need to spend thousands of dollars in order to enjoy life.
5 – Live somewhere where your money will go farther.
This could be a different part of your local community, country, or even the world.
There is a rise in the number of American’s drawing upon social security while living abroad in order to stretch their money farther. But there is no reason you have to wait until retirement.
Plenty of entrepreneurs who run digital businesses are living in foreign countries in order to keep their expenses low during the early years of their business, when revenues are low and money is scarce.
FOR THE YOUNG FOLKS OUT THERE
Student loans has exploded over the last couple decades. College graduates are entering the workforce with record sums of debt, and must begin paying them back within 6-12 months after graduation.
A recurring theme we’re seeing more of is that college graduates are getting locked into jobs they don’t really like, just so they can begin paying back their loans.
Many recent graduates would love to take some time off and explore the world, launch a start-up, or just spend some time with family. Instead, they have a handful of months to get their affairs in order and then must start the long process of paying back tens-of-thousands of dollars of debt.
Getting a college degree might still make sense, but maybe you should consider taking your time and going through without racking up a ton of debt.
[Should You Use Student Loans For College Or Pay-As-You-Go?]
UNDERSTANDING THE TRADE-OFF
Staying financially nimble isn’t easy. You have to say “no” to a lot of the things your friends and family are saying “yes” to.
It’s the old story of “keeping up with the Joneses.”
The question you have to ask yourself is “how much do I value my freedom?”
Being able to make your own decisions on your own terms is a privilege not many get. If you want it, you’re going to have to make sacrifices. But the rewards are well worth the effort.
Capably Yours,
Jared
