We’re now in the 6th month of the Covid-19 pandemic and I know a lot of people are focusing on prioritizing their health and finances more than ever. We’ve all had to endure so many changes over these past few months and also reassess important factors like personal finance. For me, I’ve realized that traditional financial education and rules of thumb are no longer going to cut it. In my opinion, we all need a larger emergency, less consumerism, and a positive perspective on financial freedom.
Why Financial Freedom Right Now?
Financial freedom has always been my ultimate goal for wanting to pay off debt and get better at my finances. However, after the onset of Covid-19, I’d developed a new understanding of this concept and a new appreciation for it overall. I know plenty of people who have criticized the FIRE movement (financial independence retire early) in the past and some had valid points.
Still, after watching businesses close down, unemployment numbers reach new heights, and an increasing number of people worry about how they are going to pay their bills, my mind was made up. I’m going to start pursuing the FI part of FIRE and with more intensity than ever before. Financial independence is the status of having enough income and assets to cover your living expenses without having to earn an active income (ie. work a job).
To be clear, I’m not focusing on reaching financial independence out of fear or worry or wanting to actually retire early, but out of a true appreciation of the benefits, FI can provide and how it aligns with my values.
Here’s how I came to this decision and what Covid-19 taught me about financial freedom.
Breaking Down Consumerism Habits is Crucial
According to psychologists, consumerism is materialistic values that stem from insecurities that are linked to lower life satisfaction. It’s also commonly compared to keeping up with the Joneses. On the surface, it may seem fun to buy your kids the latest gadgets, go out to eat every night, and make other lavish purchases.
But deep down, we know that material things don’t lead to happiness. So why do we keep buying them? Once our state governor announced a shutdown due to Covid-19, it meant we couldn’t go out to the store for non-essential items. And do you know what happened? We survived. We were blessed enough to remain healthy but we also realized we could get along fine without buying a ton of stuff.
My family and I bonded more together at home and learned how to work with what we have. Consumerism can often lead to a lot of pain and suffering due to debt and other financial issues. Plus, it can even make you feel worse if you’re relying on things to fill a void. To top it off, maintaining bad consumerism habits can make it harder to reach financial independence. If I can remain just as happy while buying fewer things AND get closer to financial independence, that’s the path I want to take.
Having Options Often Comes From Money
Back in March, my husband lost his main job but still had a side job delivering pizzas on weekends. We sat down to look at our budget and see how the loss of income would affect us. During this time, Coronavirus cases were rising steadily in our area and we questioned if my husband should even go to his pizza delivery job.
After assessing our budget, cash flow and savings, we decided to let him take a few shifts off. This allowed us to see how his company would handle keeping workers safe and also allow more time for valuable information about the virus to get out. I realized how blessed and thankful we were to have this option but it was not a result of pure luck.
Over the years, my husband and I had worked hard to pay down debt, save money and diversify our income. These were initially important financial moves to make in order to pursue financial independence. I realized that people who were financially independent didn’t have to ask themselves whether going to work during Covid-19 was necessary. It wasn’t a decision that dictated whether they’d be able to eat or pay bills that month. That’s what I wanted for myself and my family.
FI gives you options. During uncertain times, having options can make a world of a difference.
Asset Diversification is Always Key
To me, becoming financially independent is not about throwing all my eggs into one basket. No one knows what the future will hold and diversifying assets is key if you want to survive the next recession or major life change. When the stock market dropped, I thought about all the people who had put all their money into stocks. It must have been a nervewracking time for them.
When several states began shutting down, I thought about all the people who wouldn’t be able to pay rent. This also made me think about all the real estate investors who depended on that rent check to meet their own basic needs.
This reminded me that as I pursue FI, it’s best to diversify my assets as much as I can and have several savings buckets. If the stock market dips or another investment fails, it won’t be as damaging had I put all my eggs into one basket.
Starting Today is the Second Best Time
Of course, starting last year, 5 years ago, or whenever you hard about financial independence was probably the best time to start. The second best time to start is now. I used to think I couldn’t actively pursue FI because I didn’t earn enough or due to being self-employed and having a fluctuating income. The thing is, you never know what you’re capable of until you give it a try.
A specific plan and determination can go a long way. Fidelity has a FIREStarter calculator you can use to estimate how much you’d need to save and how long it might take you to become financially independent. I encourage you to check it out, dream a little about what’s possible, then put a plan in place and take action.