Once I came accross an article by Neal Gabler describing the secret shame of about 47% of US citizens who couldn’t come up with 400$ in case of un unexpected expense. He describes the shame through his own story, albeit his higher earnings barely meeting ends and rolling up debt. I used to think that financial viability was all about earning enough, which would of course be somewhat more than todays earnings. But the article got me started learning about financial insecurity and seeing how low earnings are only part of the story and it’s much more about handling money poorly.
People don’t like to discuss money matters, even worse might not even want to think about it. Money is the thought of the greedy and worry of those who ain’t got it. Not to think is supposed to clear you on both accounts, not greedy and not poor. But the logical mistake is that thinking about money is more about earning than spending it. As this approach could work if you are a descendant of Rockefellers or a traveling monk living on handouts by good people. Reading this good chances are you are neither..
The opposite approach is constant worrying about repeating money issues. This could be a result of bad planning and use of money – usage that is driven by impulse buying and over-influenced by marketing approaches. In our thoughts money becomes an end goal, instead of being treated as a tool for achieving goals.
Somewhere in between are the middle grounds – a healthy relationship towards money that enables us planning income and spending, setting goals in accordance with our values and enjoying achievements. Money is a bad master, but good servant.
True, money can’t buy you everything, like honesty, mastership, integrity, happiness .. well the last one is only true when over a certain limit I understand. However for most things today we need it, simply because we either aren’t able or it doesn’t make any sense to make them by ourselves.
Money plays a role of an exchange medium. Mostly we get it in exchange for our work or property. According to our needs we exchange it back to property, saved time, experiences, etc. Our ideal exchange circle therefore represents changing our efforts and time by means of money for things that give us longlasting and great value. (This seems to be quite unique to each of us as explained by George Carlin :- )
Problems can occur in each link of the circle:
- feeling we don’t earn what we deserve
- removing money from the circle and making it a goal in itself
- exchaging money for things that are not important
We should aim to develop such attitude towards money that enables us aligning our capabilities and goals. We are all born into a (financial) dependance, when we depend upon other people, our parents or caretakers. At this level we are simply a consumer of things that are handed to us.
We are given a chance to work toward financial freedom and this path is made up of achievable steps. What this blog is about is to present these steps. At the core of it are the stages of financial freedom through which we grow towards ever greater autonomy :
- Dependence – you depend on others for support. Either without income or accumulating debt. We all start here as children.
- Solvency – you’re earning income to cover expenses and not accumulating debt anymore.
- Stability – you are saving some money, repaying debt and have some money set aside for any emergency.
- Agency – all debt cleared and biger savings. It’s the final ‘survival’ stage.
- Security – First ‘financial freedom’ stage. You can pay for your basic needs from your capital/property income, not relying on job for income. You don’t need to work if you don’t want to.
- Independence – your capital/property income can cover desired lifestyle.
- Abundance – your capital/property income exceeds your needs. You’ve got enough and then some.
You’ll be interested, based on the stage you’re in, what are specific targets, tools and activities towards next stage. Just follow the links above.