The beginning of a series examining wealth.
As a young girl, I have vivid memories of going grocery shopping with my mom. While we strolled through the aisles of Food Lion I would eyeball all the junk food I desperately wanted to toss in the cart. Dunkaroos, Oatmeal Creme Pies, Oreo cereal and ice cream would dance in front of my eyes as my mom steered us towards fruits and veggies. I remember thinking to myself, “When I grow up, I can eat all of this anytime I want! Even for breakfast!” Independence would taste so sweet. Well, I’m grown up and can indeed eat the occasional ice cream bar for breakfast, but I want a different kind of independence now. Financial independence.
In order to achieve financial independence, it’s important to first define what it means. It’s rare two people will have the same definition of financial independence. Some may point to paying off their debt, others will cite being able to save a certain amount of their paycheck with ease, perhaps a certain few mention no longer making withdraws from the Bank of Mom & Dad. To me, those are all steps on the journey to financial independence, because if you’re still relying on a paycheck can you truly call yourself independent?
The summer before I started college my fiscally responsible father handed me a book titled, “The Rules of Money: How to Make It and How to Hold on to It” by Richard Templar (affiliate link). Rule number two read: Decide on Your Definition of Wealth. Templar wrote, “…[my friend] would consider himself wealthy when he was living on the interest on the interest on his capital.” In that moment, during the summer of 2007, I decided my definition of wealth was intertwined with financial independence. Instead of assigning a number to what I decided would be wealthy, I hijacked the version from The Rules of Money. My definition for wealth: to be able to comfortably live off the interest on my capital. I wasn’t going to get greedy with interest on the interest! If I could sustain a comfortable lifestyle, living off my interest for the rest of my life, then I would consider myself having obtained financial independence. It would require a pretty impressive capital to achieve such a feat which probably meant some savvy investing.
Perhaps it sounds like an unattainable goal to most, but I set the bar high because it motivates me to work hard and educate myself. Hard work alone will not achieve my goal, I need to be a savvy investor and most likely an entrepreneur. I also find my definition of wealth more useful than saying, “two million dollars sounds wealthy.” Sure, right now that sounds wealthy, but if I had two million handed to me right now, I wouldn’t be financially independent for the next sixty plus years. With some savvy investing I could make it stretch, but it wouldn’t be enough to sustain a family at the lifestyle level I hope to obtain. The frugality-focused personal finance writers are rolling their eyes right now.
It’s all about lifestyle choices. Minimalism to extreme levels isn’t appealing to me as a long-term financial solution. I would rather be able to take nice trips, buy the occasional luxury items, dress in non-thrift store merchandise, pay for 50% of my future-children’s college education and donate to organizations making meaningful changes in my community.
Living a frugal and materialistically-minimalist life now, more by necessity than by choice, is important to secure my financial future. However, I don’t intend to be Scrooge McDuck forever, except for the fact that he’s sitting on a massive fortune. And yes, I recognize that I’m citing a “tightwad” character as one who amassed a fortune. Forbes has even taken a crack at estimating Scrooge McDuck’s wealth for the Fictional 15 this year and it hovers somewhere around $65.4 billion. But why have $65.4 billion if you aren’t going to at least spend some of it on experiences, charitable giving and the occasional luxury item?
Before we digress too much, these thoughts are being saved for future posts in this series on wealth (where we can debate all those studies about wealth’s relationship, or lack of, to happiness). For now, share with me your definition of financial independence and wealth (in the financial sense).
[Dunkaroos image taken from Flickr]