Reap personally fulfilling experiences through financial independence.
Good morning! This is a guest post from Alex Smith, Alex is a 20-year-old accounting student from Des Moines, Iowa, and he is the founder of wealthydiligence.com. His website provides advice on investing, retirement planning, and saving. Every month he provides his updated financial statements, so you can follow his journey to financial freedom.
In 2001, “Good to Great” by Jim Collins took the business world by storm. For those of you who are not familiar with the book, Collins performed extensive research to determine specific actions that companies took to become great; additionally, during his research he discovered certain actions that would inevitably cause companies to fail. Collins created a list of “Best Practices” that were always evident in the “great” companies. Best practices and benchmarking are utilized in every aspect in life. Whether it’s emulating your favorite athlete or following the recipe of a world-class chef, we all fundamentally recognize there are certain, undeniable truths that will lead to either success or failure. Therefore, we listen to people who have had real-life success and not people who theorize; we want to learn from people who have done something because they have the wisdom to help us reach our goals. The only way to create a list of “Best Practices” for personal finances, is by creating an atmosphere of financial transparency.
My personal utopia is a world where it is no longer taboo to talk about one’s financial situation. In my experience, it is less acceptable to talk openly about your debt than your intimate relationship with a significant partner. Our society has created a culture that makes people feel so ashamed of their financial burdens, and this is only exacerbated by the fact that they cannot talk to someone about it. A lot of people choose to live a lifestyle that is well beyond their income level because they see their peers driving a nice car or buying a new home. Very few times does it ever cross our minds to question “how they bought that car” or “how they financed that mortgage”. They very well could have an inheritance, but more than likely, they took on A LOT of debt. See, we all want to impress our peers (it is the essence of human nature), but there is so much we don’t know about our close friends. Financial struggles are the number one cause of divorce, debt is a driving force in an increasing number of suicides ever year, and financial struggles are plaguing humans more than ever. This could all be solved with one, simple solution: increase financial transparency!
Financial transparency is why I am so upfront and honest about my personal financial situation. I tell you my income, my spending, and my net worth down to the dollar! The beauty of my situation is I am incredibly average, and by being average, a lot of people can benchmark their financial information to mine. No longer will you have to wonder “How can someone who only makes $50,000 a year survive”. I will show you how! This will not only keep you accountable to your independent actions, but it will also give you hope that your dedication will pay off. A little secret too, I don’t do it through extreme frugality (unlike a lot of personal finance advisers). No, I believe in sound investing and empowered financial decisions and not by cutting your lifestyle to abysmal levels that would leave you unsatisfied.
The overarching reason I am striving for financial independence and transparency is to find personal fulfillment. In my business policy class at university, my professor asked the class what we would do if we had a billion dollars. Some kids joked that they would invest the money to make even more money (smart kids), but the purpose of the question was to challenge us to think about what we would do if money was never a problem again. This led me down a path of self-reflection, and I realized that nothing in my life would dramatically change if I was filthy rich (other than a few more vacations). I would still work 40+ hours a week, work out every day, and hangout with my same friends; the only difference would be I could do whatever I wanted (within reason of course), on my own terms.
I don’t believe you should be aiming for financial independence, so you can be lazy, quit your job, never work again, and watch television all day. The true purpose of financial independence is the freedom to do as you please; you are no longer dependent on someone else for income, so you can take on personal projects that excite you. You can volunteer at the homeless shelter, start a non-profit, or begin a challenge you have put-off in the past. When the day comes that I reach financial freedom, I plan on working more than I ever have before, but this time, everything will be on my terms. There is beauty in contentment, and that contentment is best attained through self-satisfaction earned through personally rewarding experiences. My goal for you is to create a list of a few things you want to accomplish in your life and make these the reasons you are shooting for financial independence. You will find it much easier to save and invest, and it will provide you with a greater purpose in life.