July 1st is National Financial Freedom Day, and what better time to explore how “financial independence” has evolved into a buzz phrase that is frequently thrown around. However, without context, it is easy to misinterpret what it even means. The truth is financial independence means different things to different people.
I have started paying for my car insurance and apartment. I am financially independent!
I cannot live solely off interest and dividends without dipping into my principal. I am not financially independent.
Both statements can be true and both statements can be false. At its most basic definition, “financial independence” means that you are no longer dependent on another individual to provide for you.
The great thing about personal finance is that it is PERSONAL. That is why one of the most critical parts of developing a successful, holistic financial plan is defining specific goals important to you and your family. Once you determine your goals, your financial advisor can help you create a customized plan, timeline, and action items to achieve your goals. Oftentimes, your action items become financial habits, a way of life, or we like to call them your “standards.” By holding yourself to your personalized standards, your goals become trackable and achievable.
Goal: We want to retire in 5 years with $10,000 per month in spendable income. Your advisor will assist you in creating standards that will help you the best opportunity to achieve this goal.
Standard: We will save 15% of our – post-tax income each year toward our retirement goals. With this being a standard, you know that no matter what your income level is, you will be contributing to your retirement savings for the big day!
It’s important to remember that “life happens.” Give yourself the benefit of updating your goals annually with your financial advisor. That way, if the unexpected happens or your priorities change, you can alter your goals and timelines to achieve the lifestyle you dream of.
Reach out to your Bridgeworth advisor to schedule a time to meet. It is our privilege to help you develop, update, and maintain a personal financial plan aimed at allowing you to meet and exceed your goals. Happy Financial Freedom Day!
Bridgeworth Wealth Management is a Registered Investment Adviser.