Defining “Financial Independence” for Yourself

Part of the financial planning process involves thinking about your ideal future and what that looks like – whether it’s enjoying a lifestyle of travel, living in a home you designed yourself, or surrounding yourself with friends and family. A frequent desire we hear from clients is to experience financial freedom, or financial independence – but those phrases often mean something different to different people.

In the U.S., American citizens celebrate the country’s independence from British rule each July. Dictionaries describe “independence” as “freedom from being governed or ruled by another country.” But a second definition speaks to individual freedom – the ability to live your life without being helped or influenced by other people. In recent years, the “financial independence, retire early,” or FIRE movement, has rekindled the desire – particularly among young people – to pay off debt, cut expenses, save as much as possible, and invest as soon as possible to facilitate an early retirement (or working on whatever projects you choose).

But what if you like your job and don’t want to retire early? Or you own the company and want to see it succeed – with you at the helm – indefinitely? As you might imagine, your definition of financial independence, or freedom, or security, is entirely personal. However, with a world of options to consider, you may find yourself struggling to determine what it looks like for you.

Find a Comfortable Process

At Savant, our goal is to help our clients picture their ideal future and work with them to create a personalized plan to achieve it. For some clients, picturing their ideal future is easy. They may envision a life surrounded by family and wish to have a large budget for frequent family gatherings and vacations, a house large enough to accommodate multiple visitors at once, and time for extended travel. For others, desires and opportunities may be less clear-cut, or so numerous that it’s overwhelming to prioritize them. That’s where having a decision-making framework can help.

Jennice Vilhauer, Ph.D., writes that one way to figure out what you want in life is to start by figuring out what you don’t want. In an article for Psychology Today, Vilhauer writes that while many people have a difficult time identifying what they want, they have a much easier time defining the opposite. She encourages readers to use the negatives or unwanted situations as a reference point for defining what a better outcome could look like. Once you’ve envisioned a future that seems stimulating and creative, it’s time to drill down on what else you might like about the scenario. From there, you can begin to piece together the details of your “ideal” future. If you’re worried about changing your mind, Vilhauer explains that it’s all part of the process: “It doesn’t mean you don’t know what you want; it means you know you want something else instead,” she says.

Consider Yourself First

Sometimes it helps to set aside the influence of your spouse, children, or parents, and consider what you would choose if your ideal future were up to you alone. What are your nice-to-haves and non-negotiables? You may be surprised to understand how your feelings differ, but you may also see opportunities to accommodate your wishes and those of other people who play a central role in your life.

Remember that “Independence” Isn’t Always about Money

We all want to have enough money to do the things that spark joy in our lives, but what makes you feel independent may change throughout your life. Your younger self may value moving away from home, living on your own, maintaining a job, and finding a partner to spend your life with. Later, it may mean becoming debt free – paying off student loans, owning your home free and clear, and having the money to pay off your credit cards each month. Toward the end of your life, you may value health and vitality, family and friends, or the ability to stay in your own home as your true measure of independence.

Your Advisor as Guide

If there’s one thing that’s true about personal finance, it’s that finance is personal. What works for one person may not work for another. That’s why, when you work with a financial advisor, it’s important to share your situation, goals, and interests throughout each life stage.

We believe working with a financial advisor can be a bit like working with a seasoned travel agent – one who has flown on all the airlines, stayed at all the hotels, eaten at all the restaurants, and knows how to help you achieve the best experience – on your terms.

Don’t wait for a big fireworks show in your life to start thinking about your ideal future. Pick your “July 4th,” and create a plan to declare your independence. Your future self will thank you.