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Chapter 1

      Navigating the (Bumpy) Road to Financial Independence

      IN THIS CHAPTER

      Achieving financial independence and feeling financially secure are admittedly subjective assessments. A nest egg of $200,000 may seem like a lot to some people but not to a high-income earner who is accustomed to spending $100,000+ annually.

      Now, for many people the feeling of financial security isn’t simply a matter of how much money you have to your name. Numerous other factors may contribute to feeling secure financially, which I help you to understand.

      In my work as a financial counselor and educator, I’ve also seen people for whom having a certain level of wealth to feel secure is a moving target. And those targets tend to keep getting bigger and bigger over time once a given lower targeted amount has been achieved.

In this overview chapter, I walk you through determining what financial security means to you, assessing where you are now, and helping you think through what you need to do to accomplish your goals. I also survey the landscape of crises, both personal and in the broader economy, which you should be prepared to handle. Finally, I discuss how to best position yourself to benefit from the inevitable opportunities that present themselves during tough economic times.

Reaching for Financial Security

      A good place to begin is by defining what financial security means to you and what is and isn’t important to you. Then I help you think through and understand where you are now and what you may need to do to accomplish your goals.

      Defining what you value

      If saving money is a good habit, the more you save, the better, right? Well, no, not really, unless your sole goal is to amass as much money in various accounts as possible. But what if you’re not spending enough to eat a healthy diet? How about some time and money so that you can regularly rest and enjoy some recreation? What about some spending for the special people in your life?

      Think about all the big decisions in your life: choosing and finding a job, a place to live, a spouse, and so on. For most people, there’s a financial component to all of these. When thinking about personal goals, nearly all of them take money to accomplish. Money is inextricably linked to the rest of your life. Making the best financial decisions starts with the big picture and the rest of your life in mind — in other words, holistically.

      Suppose like many people, you are working and earning money. You’d like to save and invest some of that and not have to continue working full-time for the rest of your life. But you probably have some other competing uses for your money. These may include things like saving to buy a home or start a business, expenses for your family, a future vacation, and so forth.

      Money shares some similarities with food. If you don’t have enough, you likely notice the insufficiency of your resources. Having more than enough with some reserves and extras usually provides most people with some peace of mind. Different people, though, have different views of how much extra they may want to have.

      The virtue of a capitalistic economy is that within reason, if you’re willing to work hard and seek to improve yourself and your work, over time you should be able to see your money grow. The progress and advancement of technology and society generally increase the purchasing power of your money over time.

Some folks lose sight of the differences between necessities and luxuries, especially in affluent and upper-middle class communities and circles. We can always find people with bigger homes and more expensive cars who have taken more exotic vacations. The bar can continually be set higher and higher in terms of how much money we “need.”

      The continual improvement of products and services, particularly those that incorporate a lot of technology, leads to more folks taking for granted how “luxurious” some of today’s choices are compared with those of the past. Consider what’s happened with personal computers and smartphones. Today, consumers buy smartphones that have many of the same functionalities and can access far more information than personal computers could a generation or two ago. And you can buy today’s smartphones for less than the cost of personal computers from a generation or two ago. Today’s smartphones are like a handheld personal computer, a phone (that can easily travel with you),

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