Financial Independence: Am I Already There?

By Modern Wealth Management

February 13, 2020

Financial independence can be defined as the day your money goes to work for you instead of you working for your money. Achieving financial independence means you never have to work another day in your life you don’t choose to. It means you have the freedom to devote your time to the people, causes, and things you care deeply about, rather than your job.

It’s the deep inner peace that comes with knowing you’ve done everything you could to secure your financial future and those of the people you love. The problem is most people don’t know when they’ve arrived at the point of financial independence, and they blow right through the finish line, unaware they’ve won the race.

If you have taken a road trip with children, you know what a challenge it can be. Thirty minutes into your 8-hour drive, the question you’ll hear a thousand times during the trip that comes out of one of their mouths is; “Are we there yet?”

Chances are high you asked your parents the same thing as a child.

And that question never ends; it just changes context. Today, when it comes to your financial independence, you’re asking yourself the same question, “Am I there yet?” Well, are you? What if you are and you don’t know it? If you knew for a fact you had reached your goal of financial independence, wouldn’t that change the way you lived your life going forward? I’m betting it would. And if it would, wouldn’t you want to know, sooner rather than later, that you had achieved financial independence? Again, I’m betting you would.

36,500 Reasons to Find Out

I was hanging out with some of my grandboys a few months back, chatting about things kids like to talk about. You know, like, “Grandpa, how far is it to the moon? What kind of cell phone did you have when you were a kid, grandpa? Grandpa, what do worms eat? How old are you?”

I answered that last question, which was asked by my then seven-year-old grandson Braxton saying, “Buddy, I’m 55 years old,” to which he replied, “So you’ve been alive for like 100,000 days!?!?” I almost fell to the ground, laughing! When I composed myself, I said, “Braxton, how many days are in a year?” Based on his question, you won’t be surprised to hear he didn’t know the answer.

So I told him, “Let’s do some math together, buddy.” I said, “There are 365 days in a year, so, if I live to be 100 years old, I will have only been alive for 36,500 days.” I’m not sure he picked up on the gravity of those numbers, but they hit me like a ton of bricks! Only 36,500 days on this earth IF you live to be 100. Let that sink in. Only…IF.

We all Won’t Get to 100, so Make it Good!

For at least half of you reading this, 36,500 days is a pipe dream. My father only got 24,455, and the last 365 of those were…shall we say…not good days.

My Uncle Mario got 10,950. Life is unpredictable and very, very, short in the grand scheme of things. How many of your precious days are you willing to waste? How many? I say Zero!

Kenny Chesney’s song, Don’t Blink perfectly sums up what I’m trying to say here. In the song, he’s talking about a man who is turning 102. He’s being interviewed by a reporter who asks him, “What’s the secret to life?”, and the man replies:

“Don’t blink – Just like that you’re six years old and you take a nap and you

Wake up, and you’re twenty-five, and your high school sweetheart becomes your wife

Don’t blink – You just might miss your babies growing as mine did

Turning into moms and dads next thing you know your “better half”

Of fifty years is there in bed And you’re praying God takes you instead

Trust me friend a hundred years goes faster than you think – So don’t blink”

Financial Independence: Save the Date

Understanding we all have a limited amount of our most precious resource, time, it becomes critical to understand when you’ve reached financial independence. It’s also crucial to understand what you need to do to get there if you’re not there yet. And, although financial independence doesn’t necessarily mean retirement, for most it does.

If it does for you, you probably want to keep as many of the days you have remaining set aside for retirement as possible. In its simplest terms, retirement is the longest vacation you’ll ever take, right? You leave home…i.e., your job…and you never come back. And, you know how much you look forward to your vacations. You mark them on the calendar and cross off the days as they pass, eagerly anticipating the arrival of the day you embark on your vacation journey.

Unfortunately, most people spend way more time planning their vacations than they do retirement or their path to financial independence. How amazing would it be to know your date of financial independence so well that you could mark it on your calendar? Well, you can. Let’s talk about how.

You should know up front that this isn’t one of those “12 easy steps to financial independence” lists. The first rule of financial independence is; if it were easy, everyone would be financially independent. But they’re not…because it isn’t easy. Its work. However, it may be some of the most rewarding work you ever do.

Financial Independence: Charting your Course

The mathematical details of financial independence are as different for each person as people are different from one another.

But charting the course is the same for everyone. You have to know your destination. In other words, what do you need to be financially independent? To start the journey, you need to know the following:

  • How much income, exactly, will you need to support your lifestyle when the paychecks stop coming in?
  • What about the exact amount you will you need to maintain healthcare coverage?
  • How much income will you need to do all the things you’ve dreamed about being able to do, in addition to the income you’ll need for daily living? There’s a significant difference, and it shouldn’t be overlooked. Some of these expenses will be fixed, and some will need to be inflated over time.
  • Where, exactly, will all that income come from? Social Security, Pensions, Rentals, Investments, Royalties, Farm Income, Part-time work, Book Sales, etc.

How much of that income is going to be subject to taxation?

  • At what rate? Taxes will be the biggest eroding factor in your ability to maintain your standard of living. Can you reduce the tax bite with proper planning?
  • Are there significant purchases you’ll need to occur to complete your retirement dream? Should you pay cash? Can you cash flow them? What money should you use to make them? Are these going to impede getting to financial independence in the time you’ve allotted yourself?
  • If a large portion of your income is from pensions and Social Security, will the surviving spouse be able to maintain their lifestyle if you pass early and they lose some of that income?
  • If the answer to the above question is yes, do you need to purchase a life insurance policy to replace that lost income? Can you self-insure that risk? Is a combination strategy the answer?
  • Are there charities, churches, or causes you want to continue to support during retirement? How will you do that? What funds should you use? The right choices can make a tremendous difference. Do you understand how?
  • Do you wish to pass your money down to people and causes you care about? Is there a specific amount you have in mind? Do you have a properly designed Estate Plan in place to make it happen? Have you taken into account new complexities arising from the SECURE Act?
  • Have you thought about the potential retirement age risks you can’t avoid, but need to have contingency plans for?
  • Do you know how much risk your investments need to take for you to achieve financial independence in your ideal time frame? Do you know how much risk they need to take to support your spending needs once you’ve retired? Are your investments taking on too much risk and putting your plan in peril?

How do you make decisions where financial matters are concerned? Why?

  • Do you find yourself getting in your own way? Does your spouse think you do? Does your spouse think you’re too tight with money? Too free? This is critical.
  • What are the things you care most deeply about and what does your one best financial life look like? What do you want to spend your most precious resource (time) on once you’ve achieved your financial independence? Paint this picture in glorious detail, and you’ll realize it much sooner than you otherwise would. I promise!

Financial Independence: Are you Already There?

We sadly find that too many people have achieved their financial independence and don’t even realize it. The reason is that they haven’t answered the questions above in detail required to know they’re there.

Often, there’s a random number they’ve had in their head for years…if not decades…they see as their financial independence “number.” In almost all cases, the number is arbitrary, yet holds tremendous emotional sway over them and their decision making. Also, in virtually all cases, their spouse isn’t in any way emotionally tied to their number, but to things they find much more emotionally important to them. This creates an unfortunate disconnect, and some disharmony, in an otherwise healthy partnership.

This is where we can help. When we take people through our process, which we call the Guided Retirement System (GRS), we help them answer all the questions that need to be answered. We help them understand why/how they make the decisions they do, and whether or not they’re getting in their own way on the road to financial independence. If they are already there and don’t know it yet, we help them see clearly they have made it, and give them the ability to focus on the most critical things in their lives rather than on their money or that random number in their heads. If they’re not there yet, we give them a clear set of instructions to get them to their destination as soon as humanly possible.

Knowing Where You Are Versus Where You Want to Go

But knowing where you are in your journey and where you want to go is only half the battle. Just like the GPS in your car, when you get off course, you need the ability to reroute yourself so you still wind up at your destination, if just a little later than planned. Alternatively, the GPS in your car can often find and suggest alternate routes that get you to your destination sooner than expected. Wouldn’t that be nice?

Once all the planning is done, through constant monitoring, and a list of prioritized action steps that need to be done, we can make sure you’re always on course, and let you know when you’ve arrived at your destination. Maybe you’re already there!

Let’s find out today. Your financial independence awaits you!

If you’re ready to find out where you are on your journey to financial independence, call us at 913-393-1000 and ask for Merek or schedule a complimentary consultation below. He’ll get you set up with an advisory team at one of our three locations in Lenexa, Lees Summit, and the Northland to walk you through the process to find out if it’s right for you. There’s no cost and a lot to gain. Spend a little bit of your time with us, and we’ll help build you a plan to make the most of the rest of your life.

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Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.