5 steps to help working moms reach financial freedom
Have you heard about the FIRE (financial independence/retire early) movement? The whole idea is that you adjust your lifestyle to spend very little, save a huge percentage of your income; since your lifestyle only requires a small amount of income, you save a lot and because of compound interest, you can retire early. At first this seemed like an interesting concept, but I quickly realized it wasn't for me.
Reason #1 FIRE isn’t for me: I love what I do and aspire to rise in my career, not retire from it.
Reason #2 FIRE isn’t for me: I live in a big city and while I could cut some expenses, I will not be able to live on $20,000 a year unless we make a HUGE life change – uprooting our family, getting new jobs, a new house, a new school, a new daycare. I’m looking for better balance in my current life, not to create an entirely new life.
Reason #3 FIRE isn’t for me: We don't spend extravagantly to start with and I don't want to live a life where I'm penny-pinching, especially as I can see that I will increasingly need to pay for more help (for example to clean the house) to balance 2 kids and a growing career.
Then I came across the concept of financial freedom. The idea behind financial freedom is that you can define it however you want – it’s adaptable to fit your needs. If you want to work to retiring at 50 – that’s financial freedom for you. If you want to be able to take a year off and travel when your kids are young, then that’s financial freedom for you.
What does financial freedom mean for you?
Do you have financial goals? Are they clear and concrete? Are they ambitious? Is it something that you expect to achieve with time and limited effort or do you think you will have to push yourself to achieve these goals? People who have concrete goals are far more likely to achieve them. So why not start by making some financial freedom goals? If you need some help figuring it out, you are not alone. I tried to figure out what financial freedom meant for me. My first attempt included:
I want to have enough money to pay for my 2 boys to go to college.
I want my husband to be able to retire or partially retire at 50.
When I really stopped to think about these goals, I realized they aren't about me. They are about the people I love. That's great, but such a mom response, thinking about what I can do for other people. I was left with the question of "what does financial freedom mean for me?" Honestly, it took me days to come up with ideas and I could tell they weren’t even good. Here are 5 steps to help you think more deeply about my vision of financial freedom.
Step 1: What would you do if you won $10,000,000 in the lottery?
How would your life be different if you won the lottery and didn't need to worry about money?
Step 2: Who will you include in your financial freedom goals?
When you start brainstorming what financial freedom means for you, it is helpful to think of the different groups of people you want consider. You definitely should include a financial freedom goal for yourself. What about your spouse? Your children? Your parents? Your whole family? Charities? Thinking about who benefits can really help you think through what these goals might include.
Step 3: List the different ideas that come to mind - no need to be specific, just include all of the random thoughts that pop into your head.
Yourself: Take a career risk, work part-time, become a stay-at-home parent, take a career break (e.g., travel for a year), hire someone to cook, clean, garden...
Children: Have enough money to put them in expensive sports, saving enough money for university tuition, send them to a high-quality preschool, pay for private school
Spouse: Take a career risk, work part-time, become a stay-at-home parent, take a career break (e.g., travel for a year), hire someone to cook, clean, garden...
Parents: Provide money so they can move closer to you or travel to see you
Family: Buy a house, renovate, buy a car, travel
Charities: Donate a certain amount to charities annually, start a trust in a person's name
Did you notice that I included the same things for you and your spouse? You might want the same things or different things, but what's important is that on top of having shared goals for your children and family, you both have personal financial freedom goals.
Step 4: Group your goals into two categories: overly ambitious, very achievable.
The challenge with goal setting - especially when it comes to money
When you think about money goals are you overly ambitious - want to be a millionaire within a year? Or do you opt for easy to reach goals that you know you can achieve? I challenge myself in a lot of different ways, pushing my own boundaries, but when it comes to financial goals, my risk-averse personality makes me pick very realistic and conservative goals. That’s not setting me up for financial freedom.
What is your comfort zone and can you stretch it a little?
Figure you whether you tend to reach too high or if you aim too low. It can be helpful to talk to others, particularly those who know you well. I believe that I'm nicely balanced, but when I read others talk about financial freedom, I can see that I'm clearly aiming much lower than they are. I'm not about to become a very financially risky person, but it reminds me that I can try to stretch myself a little outside of my comfort zone.
People will fall all along this spectrum, but in my experience, many of the women I know set goals that are very achievable. Goals include paying off student loans, buying a house and a car, paying off the mortgage. While these are all great goals, this isn't financial freedom - that's regular life.
Step 5: Discuss and pick goals.
Get feedback from the people you love and trust. This is a different way to think for a lot of people, so you may want to slowly introduce them to the idea. Share what you have come up with so far. Describe your wildest dreams, the people who will benefit, your brainstorming ideas, and where you fall on the spectrum and start forming your first list of financial freedom goals. Your financial freedom goals will change over time, they are not set in stone, so don’t feel like this needs to be perfect – the goal is to get it down on paper.
My financial freedom goals
Working through these steps really helped me realize how risk-averse I can be. My financial freedoms are about making me feel comfortable enough to take more risks. My new goals are:
I would have enough money to feel comfortable taking more risks. Since I found out about my pay gap, I’ve been toying with the idea of starting my own consulting company
I would work from home most days of the week (but still work – I love what I do)
We could afford to send our boys to private school. I realized it’s fairly realistic to pay for at least part of college, it is way beyond our means to pay for private school.
What are your financial freedom goals?
1. Imagine what you would do if you won the lottery.
2. Consider who you would include in your financial freedom goals.
3. Brainstorm lots of ideas.
4. Group the goals into two categories: overly ambitious and very achievable.
5. Discuss and pick your goals.