On the long and winding road to financial independence (F.I.R.E.) or conquering your financial freedom, the important thing is PROGRESS. Moving forward week after week, month after month improving your situation. This creates a situation where your options begin to expand and compound. A simple example, if you are debt free or debt managed and have 6 months of living expenses saved up, guess what, if you hate your job you can leave and find another one, options!
The financial path you will take is like a good rigorous hike. I love hiking with my family. There is something so awesome about being with your family on a nice trail, breathing fresh air and taking in the vibe of nature. Hikes have an inherent joy and take work, just like your path to conquering your financial freedom!
So as you make daily, weekly, monthly progress on the rugged path to F.I.R.E., here are 4 truths to keep in mind:
ONE: It’s not a straight line
Life is not really linear and hiking trails have their challenges. Our brains like to think of things as linear as a way to manage our perception of an unpredictable world. Same goes for your path to financial independence. All the wealthy people I have talked with had their own unique path with ups and downs, challenges, setbacks, scraped knees and wins. What is important is that they carried on. So you make a financial mistake. Move forward and do not agonize over it, learn from it. Learn how it made you feel to be broke. How did it feel to not have options? Build options and freedom into your life.
My own path has had its share of challenges. During the great recession I got divorced, split the small amount of assets I had built up and lost half the value of my house and investment account. At the time it seemed crazy and out of control. This ended up being a tremendous buying opportunity in terms of the 401k and an investment property.
Takeaway: Even when it seem like you are taking steps backwards, keep in mind that this is part of the journey. The stock market will go up and down over time, recessions will come and go, world events that we have no control of will happen. We can just stay focused on what we can influence in our own lives each and every day.
TWO: Little things matter
As Depeche Mode reminds us “everything counts in large amounts…” Actually life is really mainly made up of the little interactions and micro decisions. How you treat your work colleagues, how you interact with your spouse or loved ones, how you engage with your children…These are all nuanced things that involve the tone, how we feel, mood, situations, if we decide to take the high ground, etc. Same goes with financial decisions. The small decisions add up to big gains and investments.
In my opinion this does not mean you deprive yourself from ever buying anything or spending money on any kind of indulgence. It just involves being strategic about these decisions. But just as in a long hike, each step matters. If a person is wanting to get healthier and build muscle, this takes lifting a weight one rep at a time or one push at a time on the exercise bike.
Takeaway: Focus on the steps we can take now in order to not be overwhelmed by the big picture. For example, did we up our 401k contribution a few percentage points? Can we avoid or delay an un required expense? etc. Even big decisions like the neighborhood we choose to buy our house in is a single decision made in time.
THREE: It’s fun to make & track progress
Find the inherent joy in making progress towards a goal. It can be challenging to think of financial independence in its entirety. That big of an accomplishment is too overwhelming. It must be broken down into smaller goals. Perhaps the first step is to pay off your car loan. Focus on one thing at a time. Perhaps your goal is to have $5,000 in emergency savings. Just doing these two things will change the way you think and approach your finances.
7 years ago we wanted to invest in another property, but did not have the downpayment saved. We made a silly little chart of our savings progress and suck it on the fridge. Every time we saved a few hundred more dollars towards our goal, we increased that savings bar. It became a fun game to track our progress.
Takeaway: Find your way of tracking your progress. Perhaps with net worth tracking? Perhaps with paying down debt tracking, although that can seem like less fun. Track progress towards saving for some kind of great vacation.
FOUR: Evolution of life & priorities of FIRE
We are constantly evolving in slow motion whether we realize it or not. Just make sure you’re evolving and not devolving. Much of the journey to financial indolence comes down to priorities. We are basically prioritizing our future time for a bunch of stuff now that we never really needed anyway. You can see how some people’s lives get on an unfortunate path of ruined relationships, health, finances, etc. Focus in on the positive small steps you can take today to make tomorrow better. This does not have to be some miraculous event like in a movie. This is making a decision today to eat something healthy, skip the expensive coffee desert and put that money in an investment, etc.
Takeaway: See the big picture vista, but enjoy each step of the way on your journey to FIRE!