Sunday, November 8, 2009

The Financial Treadmill of Life

Does lack of money hold you hostage? Here’s a clue. If you don’t absolutely love your job and yet you show up to work religiously every day…the answer is probably yes.

A job can be like a drug. We grow up in an educational system that is generally designed to turn out wage slaves. Go to school, work hard, and get a good JOB! A good job means more money and supposedly a good future for you, your future spouse, and the 2.2 kids you will eventually have. So you follow the age-old advice and work your tail off in high school. Good job! You move on to college or university so that 2-4 years later (with a little more hard work) you can leave with your ticket to a solid, entry-level position at a great company. It’s a good thing you got your education but there’s just one more snag; now you’re going to have to work some long hours to pay back that monstrous student loan you took out!

Life goes on. You impress a few people at work and maybe get a couple of pay increases under your belt. Good thing too, because now you have that car loan to pay. Hey, you have to get to work somehow, right? A bit more time passes, and you make the biggest investment of your life. Your parents always told you that a house was the best investment they ever made so you decide to make the move to home ownership yourself. Nice house, shame about the big 25-year mortgage attached to it. The credit cards also get a little workout as you add furniture. After all, who wants to live in an empty house? The Big Box stores always have those “don’t pay a cent” events on anyway. It’s practically free money, right? Then the “no payment no interest” party ends and is replaced by “monthly payments, high interest.” It’s a good thing that you have that job.

I could go on but I think you get my point. Life can seem like a financial treadmill, and yet somehow we are ill prepared to deal with it. It seems odd to me that basic money management never made it’s way into the high school curriculum.

This blog is dedicated to exploring ways to break free from wage slavery. Maybe you like your job. If so, that’s great! Maybe you always wanted to write a novel but figured out that the only way you were going to get ahead was to stick it out in engineering. You may hate it, but people depend on you, and you depend on your paycheck.

I am not going to tell you that you should quit your job tomorrow. My goal is to explore some ideas that will hopefully give you some more options. A job is an option, but so is starting a business, saving money, investing, and digging yourself out of consumer debt. It’s probably going to take some time. Personally, one of my biggest challenges has been a lack of patience so I am always looking for ways to reach financial freedom sooner. There are always trade-offs with each potential solution. Is it worth the sacrifice? You could work 60-hour workweeks and commute 1 ½ hours each way to make more money. Many people do it every day. The price? You may never see your family. I did this for a time until I realized it was killing my home life and me in the process. My 4 year old daughter begged me every night not to go to work the next day. We found another way. There are always options; you just have to be open to them.

The ultimate freedom is to be able to choose the work you want to do without regard for compensation (in some cases this choice may be no work at all). To get to this point we need a plan that will answer two basic questions.

How much money do you need?

The amount of money you need depends a lot on lifestyle and where you live. If you live in Toronto and like to vacation in Europe frequently you are going to need much more than someone living in Northern Ontario who likes to read and maybe camp on occasion. If you can cut your expenses the amount of income you will need goes down accordingly. Then again, if you want to shoot for a million it sounds like a nice round number. This goal may not be as out of reach as you think.

How can you acquire this amount?

Right now you may be earning this amount by putting in a lot of hours at work. Once you stop working your incomes stops along with it. This is one way, and in many cases the only way that Canadians know. We work hard and maybe put some of our money into a RRSP with hope and a prayer that this will see us through a traditional retirement. If a traditional retirement where you live off of a fraction of your "pre-retirement" earnings is not good enough for you, then you need to find a better way to transition from a life of working for money to one where money works for you.

I expect that this blog will evolve over time but these two questions should remain as its foundation. I look forward to sharing my thoughts with you and invite you to share your own thoughts on each topic as we go along.

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