Morning! Today I am having Jon from MoneySmartGuides who will share his vision of Financial Independence, and how he may become my neighbor under the Guatemalan sun haha. Let me know if you would like to guest post on RFI.
You can also find me today on Stacking Benjamins, talking about having a plan for your financial future, and on Club Thrifty about how to make money in your pajamas. On Make Money Your Way, Jessica Larrew shares how she has earned over $100,000 on Amazon last year 🙂 A fine busy day indeed!
When I was little, I “thought” I wanted to be financially independent. To me, being financially independent meant a huge mansion, cars and lots of things. I don’t remember what these “things” were now and at the time I probably didn’t know either. I just knew I wanted lots of stuff because I associated that with having lots of money. Ironically, at the same time, I knew I wanted to grow up to be a garbage man. (As I wrote that, I chuckled to myself, but then stopped and thought about it for a minute. I’m sure if you are a garbage man that has the right mindset, I bet you could make out fairly well. Think about how lazy we as a society are and all of the perfectly fine things in working condition we throw away. Heck, the saying “one man’s trash is another man’s treasure” didn’t make itself up!)
Post College Debt
Once I graduated from college, I thought I was set. I was going to land a job earning six figures, buy my mansion and cars and become CEO before 30. What ended up happening is that I took a job – the only job I was offered – for a starting salary of $27,500. While it wasn’t as much as I wanted, I didn’t worry. I lived life and I lived well. Too well in fact. I ended up getting myself into a decent sum of credit card debt.
As it turns out, I was buying things to feel good about myself, to make up for the fact that I wasn’t where I thought I would be. I would buy something and get “high” off of it. When that high faded, I would buy something else. I quickly maxed out two credit cards. I decided that enough was enough and opened a third credit card account because they were offering 0% interest on balance transfers. I figured I would transfer my balance from one card over to the 0% card and focus on paying off the other credit card that I was carrying a balance on.
A funny thing happened after I transferred that balance. I started spending again. Then it hit me. I realized that buying things wasn’t the solution to my problem. In order to stop all of this spending, I needed to get real with myself. I took out all of the stuff that I had bought and put it on my bed. I then took a picture of it to remind me that I spend without thinking and that I need to stop and think before I buy.
My Big Realization
As I controlled my spending and paid down my credit card debt, I realized what truly made me happy: spending time with friends and family and doing things that I want to do. Things don’t necessarily buy me happiness. People provide me with happiness. Most of all, I wanted the time to spend with others creating experiences. I needed a plan.
My Plan
In order to have the experiences I want, I need money. But the catch here is that I don’t want to be tied to a desk for the next 40 years of my life creating the wealth I need. As a result, I have diversified my income. We all know how important it is to diversify our investments. Doing so reduces risk and gives a slight increase to reward. The same holds true with income as well.
I have my full time job that still provides me with the majority of income. However I also have money invested in the stock market, generating income. I also have three blogs that I run which bring in income as well. Then there are the little things I do as well: sell things on eBay/Craigslist, take surveys, sell scrap metal, etc. All of these don’t generate a ton of income, but all of that income gets invested so that it grows and compounds.
Final Thoughts
Looking back, I realize that my younger self didn’t want to be financially independent, he just wanted to be rich. Like Scrooge McDuck rich. I’ve also realized that being rich does not necessarily mean you are financially independent and being financially independent doesn’t mean you are rich (in terms of money).
A great saying that I always have in the back of my mind is “it costs a ton of money to live like a King for a day, but you can live like a Prince forever on much less.” I love this saying. It basically is saying that you can live well for a very long time or you can have it all for a very short period of time.
If you get anything out of this post, I hope that it is some combination of the following three things:
Understand that things cost money – more money than you think they do. It’s not just the purchase price, but the ongoing yearly price over time that really hurts. Too many times we just look at the purchase price and ignore all of the other costs associated with an item.
Find a way to earn income from doing something you love. I enjoy my job. But I love blogging. The fact that I make money blogging blows my mind. I can’t retire tomorrow on the income it makes, but the fact that I even make money sometimes still amazes me. It’s not easy, as it takes a lot of work, but it never feels like work to me. I get excited when I work on my blog. I hope that one day the income will be enough for me to cover my basic living expenses. Take some time to think about the things you love doing and if there is any way you can generate income from it.
Finally, always continue to learn and grow. Before I became a fan of this blog, I thought I needed much more money in order to become financially independent. By finding this site and learning about life in Guatemala, I realize that you can be financially independent in some places with what you already have. When we learn we grow and when we grow we become better people.
Jon writes for MoneySmartGuides, a personal finance blog that helps educate people on personal finance so that they can reach their financial dreams. He focuses mainly on investing and paying off debt since those are the two of the most challenging personal finance topics we face.
This post was featured on the Money Smart Guides, KNS Financial, thank you!
I went through the same experience too. I was broke before I realized that material things are nothing if you’re not free from debts and worries. I leaned the value of living below your means and save for the future.
I’m glad I realized this at a young age so that I still have time to save and lie the life I want.
I also work a full-time job as well as make side income to supplement my full-time income. I love the fact that the extra money I make on the side is going to help me build long-term wealth – and hopefully not be tied to a desk for the next forty years as well!
For a short period I worked a FT job and PT job. The PT job was in retail during Christmas. All told, I worked close to 30 hours/wk in that job and another 50 hours/wk in my FT job. All I can remember is being exhausted and having a huge pile of clothes on my floor to go through the laundry!
I really like the life realization! I worked for several companies that paid me great money but the time and effort i had to put in meant a lot less time away from family. If I was in my early 20’s it would have been worth it to set me up for later in life before a family. As it was though I just go feed up with not spending time doing things that really mattered and like you that was family and friends and not material things. Glad to hear you are enjoying life!
My girlfriend is in your shoes now. Great job making killer money. But now that she is planning a family, she is realizing she can’t work 80 hour weeks and isn’t that in love with the job anymore.
Great post, Jon. We went through (and are digging ourselves out of) a similar story. Isn’t it great when you finally realize that financial independence isn’t at all about being rich?
It is great to realize this.
Good luck with your journey!!
Great advice here. Money itself cannot be the end. You need to find the things you truly enjoy in life and find a way to make them happen. And as Pauline has shown, there are certainly ways to make less money go further. Again it all comes down to priorities.
That’s the main thing I love about her blog. She shows you first hand how it can be done.
To me, financial independence is all about freedom to pursue the things you enjoy. Whatever level of money that will take is up to each one of us to determine in our own lives.
That is pretty much my definition of it as well. I don’t want to have to go a job. I want to be able to decide whether or not I want to work doing something that I love, regardless of the pay and benefits.
Money can’t buy happiness, To me financial independence means enjoy the life at the same time do or pursue your dreams no matter what is the end result. Do it , Give a try and it is possible only when i have financial independence
Well said!
Thanks for sharing!
This is an awesome article. I think it’s easy to lose sight of why we want to do certain things and then we never get around to doing them. I’d love to be financially independent at a semi-young age because then I could spend all of my time doing something that I absolutely love. This may or may not pay anything, but either way that would be okay with me. That being said, I’m not going to make myself suffer for the next 15 years just to become FI. There has to be a balance.
Balance is certainly a key. If you swing too much either way, there is a good chance of burnout and/or resentment. You have to find the balance that works right for you.
Its important to find what you love. My love is also blogging and its amazing to even make $0.02 off of it so I am grateful. It is certainly something that I didn’t plan on doing but now its like second nature. Thanks for the great post!
Jon,
Great thoughts. I used to think the way you mentioned you did as a kid, thinking I wanted to be “rich” someday. What I’ve learned as I’ve gotten older is that the less you can live on, the less you’ll have to be “stuck” doing something you don’t enjoy for 40+ years. I’m all about escaping that, even if it means I have to “miss out” on all the great stuff that life has to offer. Time and relationships are where it’s at, not stuff.
Take care,
I couldn’t have put it better myself.
Great post Jon. I agree with a lot of your points. I like how you say that even though taking surveys and selling scrap metal doesn’t give you a huge profit up front, you’re investing it, so it’s still worth some effort. I, too, would rather spend on experiences with family and friends as opposed to material things. It’s great that you had an epiphany where you realized you needed to stop spending because it wasn’t getting you anywhere. Now you’re selling things instead of spending on them, and have multiple income streams!
Thanks for the positive feedback.
I had that same problem with paying off debt and running it up again. Eventually you realize that you can change and stop spending so much money on crap or you can work until you drop to make monthly payments. I’m just glad it hit me before it was too late.
Jon, references to Scrooge McDuck are far too rare on PF sites. thanks for that and for an outstanding article. Thanks for sharing a fantastic story in such an entertaining way.
I too love this saying, “it costs a ton of money to live like a King for a day, but you can live like a Prince forever on much less.” And the one about having it all just not all at once.
And you make an excellent point about the growth mindset. This community is particularly focused on growth which is precisely why I return over and over.
You made a good point Jon about the credit card transfers that many people do so they don’t have to pay so much interest. They start to spend on the empty card and then they are in double trouble. There are many ways to get out of debt and spending isn’t one of them. You are right, you don’t need to have loads of money to be happy and retired. It all depends on where you are, where you want to be and how you are going to get there. Thanks for sharing this. Mr.CBB
I realized about two months after starting my first full-time “dream” job that I can’t work at a desk in a cube for the rest of my life. It took me 4 years to earn that degree. Wish I would have figured things out sooner!
Hi Jon! I like how you took a picture of all your purchases. I imagine this was very powerful.
Wouldn’t that be a great monthly practice? “Ok, honey. To the bed!” “Woohoo!!! “No, I mean, picture time!” “Woohoo!” “No, I mean, let’s take pictures of our stuff!” Oh, ok, kinda boring though. In all seriousness, I think this is a wonderful idea. What if you even tried to downsize? This month, we’re going to fit all of our purchases on one side of the bed and work your way down to Pillow-Sized Purchases.
Continual education is a HUGE key. We can never learn all there is to know!
financial independence is a good thing. It frees you from having to worry about your employment. It frees you to do whatever you want with your time. It frees you from having to make hard choices.