Spend Your Money To Maximize Your Freedom
Controlling your time is the highest dividend money pays
Answer this:
How much do you value your freedom?
Metaphorical gun to your head, if you had to put a dollar figure on it, what would that number be? Got a number? Good. Keep it in your mind as you read this article.
My Journey With Financial Freedom
As I age, freedom is becoming a value I am unwilling to compromise on. No matter what the potential upside, if it significantly restricts my freedom, I don’t do it.
What exactly do I define as freedom?
My answer:
The ability to do what you want, whenever you want, with who you want. To not be dictated by a boss, clock or money. The best form of work is when you don’t need the money that comes with it.
The mental clarity that having no obligations or restrictions imposed on you is priceless. Being able to leverage your money to buy time and options has a lifestyle benefit few luxury goods can compete with.
I would happily sacrifice a luxury car to be able to build scalable income or invest more in my low-cost Vanguard Index Fund. I don’t see this as being frugal. I see this as investing in my long-term freedom.
I’ve realized that:
Many people think that they lack discipline with their money. But what they really lack is a purpose for their money. It is difficult to create a high savings rate when you don’t really know why you’re doing it.
Most people don’t want to be millionaires. They want to be freedomaires. When people see rich people, they don’t just see envy the items they have. They mostly envy the freedom these people enjoy.
A lack of purpose is what makes people overspend, lose track of their budget and stop investing their money.
So while freedom might not be for you, attaching a purpose to your savings will make it easier to do. Do it for your children, partner, or family. Saving more money becomes far easy when you have an emotional drive to do so.
Once I started to value financial freedom, saving became much easier. I started to understand that every dollar I saved was a dollar closer to making me financially free.
Anytime I am faced with a decision, I always ask myself: how will this impact my freedom? Will it give me more or less in the long term? Most of the world doesn’t realize that most of the things you buy restrict your freedom in the long term.
“Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of well-being than any of the objective conditions of life we have considered” — Angus Campbell
Your Freedom Or Your Life
There are hidden costs with every purchase. “Every time you buy something, you’re giving up a bit of freedom and time, “ writes Darius Foroux. Every dollar you spend is taking you closer or further away from freedom.
The cost of buying a fancy car on a loan goes beyond just the listed price. Think about how many hours you have to work to pay off that 60-month car loan plus the interest every month.
Don’t even get me started on the rate of depreciation, cost of maintenance, and insurance premiums. You are essentially throwing money out the window every time you drive your car. But hey, at least you look good doing it.
Money is something you trade your freedom for. You sell your freedom for money. Yet, people are giving up more of their freedom at exactly the same time. It is becoming more valuable in society.
In his book, The Psychology of Money, Morgan Housel writes:
Compared to generations prior, control over your time has diminished. And since controlling your time is such a key happiness influencer, we shouldn’t be surprised that people don’t feel much happier even though we are, on average, richer than ever.
I bet if you asked 10 random people on the street: what is the value of money? They would respond with: buying material things — food, shelter, clothes. Few would respond by saying buying assets. Even fewer would respond by saying buying freedom.
We are not taught the value of money and how we can leverage it to live a lifestyle that we want. We are told that retirement is the only time we can plan to use our money the way we want.
Avoid These Freedom Killers
Consumer debt: Stay away from credit cards, buy now, pay later, or anything that gets you into consumer debt. Remember, if you can’t afford to buy it twice, you can’t afford it.
High cost of living: Don’t keep up with the Joneses. That never ends well for anyone. You don’t need a lot of money to have fun. You can find joy through taking a walk in the park or seeing the sunset.
Car loan: I will never, ever go into debt to buy a car. I’ve never owned a car worth more than $4,000 (AUD), and I’ve always paid cash for it. Nowadays, with the high safety standards of most cars, you can get a safe and reliable car for less than $5,000. I bought my 2008 Toyota Yaris for $4,000 in 2018 and never had any issues with it.
I find it ironic that advertisements for cars, luxury goods, or holidays are marketed toward the promise of freedom. They promise that if you buy this car, you’ll “escape the rat race” or “go your own way.”
Usually, the cars will be pictured driving along beautiful coastal waters or countrysides with the sunset or sunrise brushing the actor's wide smile. You know the ones I am talking about.
Freedom is a value we all want; we’ve just forgotten how to get it.
“Aligning money towards a life that lets you do what you want, when you want, with who you want, where you want, for as long as you want, has incredible return,” writes Morgan Housel
Invest In These Freedom Makers
Efficient and productive investments: Low-cost and well-diversified Index funds. Don’t bother chasing the cryptocurrency high. I’ve got crypto, but it makes up a very small percentage of my portfolio.
Scalable (not passive) income: Leverage the internet to create and share your creative passions. There is a niche for everything. You can monetize your thoughts, ideas, and passions through the platform economy.
High savings rate: 30–50% of your take-home income. Use this to create an emergency fund. After that, just keep as much of it in cash that allows you to sleep better.
If you set yourself up correctly, you can slowly increase your level of freedom over time. Creating freedom is not complicated, but it does require sacrifice. But the potential payoff to the quality of your life will be worth it.
Summary:
So, how much do you value your freedom? What’s the number? Next time you’re thinking about making that next purchase remember the cost it will have on your freedom, not only your wallet.
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