Hey, I'm Douglas. I'm the founder of School of Financial Freedom.
I started teaching Financial Freedom 1 three years ago after retiring at age 42. Of course, the first question people ask is how I retired at age 42. Here's the story.
I grew up in an immigrant family who fled the Communists for the U.S.. Money was tight. When I was in college, my personal budget was $5,000. When I graduated, I got a job as a paralegal at the Justice Department and made $25,000 and spent $15,000. I felt rich! I was spending literally three times more than I was used to. I decided then and there, philosophically, environmentally, financially, that that amount was **enough** to make me happy. So I decided that that was what I was going to spend annually from there on out. Since then, I've had jobs as a corporate lawyer at $150,000 and jobs as a Quaker schoolteacher at $30,000 and everything in between. But each year, I only spent $15,000 (now $25,000 through inflation) and invested everything else. When I got laid off 3 years ago, I realized that I had made enough money not to have to work anymore.
A major key is keeping a tight lid on expenses: I need a smaller nest egg to produce the annual passive income I need. Also, having a rigorously tight budget means I had a lot of freedom even during those 20 years. I had two separate periods where I didn't work for 2 year stretches because I wanted to switch careers.
The big thing I've discovered about financial freedom is you get to do what you truly want with your life. Do you care about your health? I play soccer and take naps everyday. Do you care about your relationships? I get to travel to see family when I want and vacation with my friends when I want. Do you want to make a positive impact? I get to create Portland Underground Grad School and enact the vision of what I want in the world. I think the best thing you can buy with your money isn't things or experiences, it's your freedom.
People can't imagine saving enough to gain financial freedom. Or thinking about money causes a lot of anxiety so they avoid it. But I think those attitudes and beliefs being from lack of education, which cause a lack of empowerment. Most people weren't taught financial literacy when they were young. Their parents didn't teach them and they certainly were taught this in school. But avoidance is a really bad strategy. 56% of Americans have less than $10,000 in retirement savings. Looking at people closer to retirement age, Americans average $60,000 in their 401k at retirement. That's not nearly enough to fund 20 years of retirement, especially with the upcoming crisis in Social Security.
I got a number of outstanding questions when I asked the mailing list what questions they had about Financial Freedom.
How should I be investing my money and thinking about the future? How should I keep track of my spending without feeling like I'm counting pennies? The way I think about it is annual profit. Take a company, say Apple Computer. When you ask Apple Computer who much they made last year, they tell you their profit ($37 billion in 2016, BTW). They take their gross income (sales from phones and computers etc) and subtract all their expenses (salaries, materials etc). But when you ask a person how much money they make, they tell you their salary. In other words, they tell you their gross income without thinking about their expenses. I want to offer a new way of thinking: what's your annual profit? How much money do you have after all your expenses? That's what you're using to buy your financial freedom. I think that shift in thinking helps you stop thinking about counting pennies and towards building a future you want.
How does a couple whose individual relationships with money differ negotiate and deal successfully with their differences?
How do I change my relationship with money/scarcity and how to know what "enough" looks like (spiritually and financially).
How can I get out of the cycle of saying (every single month): My god, we spent a lot! Next month we have to do better?
These are all great questions individually and yet there's a common theme to them. Money is never about money; it's about your relationship to money. We all grow up with money scripts, unconscious stories we've learned and then tell ourselves about money: it's evil, or it's love, or it's never enough. Part of financial freedom is becoming aware of those money scripts and learning to tell a new story of money in your life. For couples, understanding that they come with different scripts and desires is so important to coming to a joint understanding of what they want together.
The best personal finance book out there is Your Money or Your Life. It talks about how "most people’s money problems are actually connected to a lack of fundamental direction in their life." If you deepen into your values and what you really care about (your children, being healthy, learning, making a difference), knowing what "enough" is and actually keeping a budget becomes a lot easier.
In the next blog post, I'll talk about the how thinking about money is really thinking about deeper questions about your sense of purpose and discovering what makes you happy.
Thoughts? Feel free to add a question or contribute to the comments section below.