I have a confession to make. I am a financial planner and I’m not saving for retirement.
That’s right, you heard it here first.
I was saving for retirement at my old job that had a 401k matching program. They matched up 50 cents on the dollar up to 6% of what I put in so I shrugged and made the contributions.
I’d been told by everyone around me, financial advisor or random person on the street, that saving for retirement was the most important thing I had to do.
Then I started meeting clients for Brunch & Budgets and asking them what I thought was a very thoughtful and important question – what does retirement mean to you?
Want to know what I heard back?
“Meh, I don’t ever plan to do that.”
“I’m just going to figure out what I love to do so I can do that forever.”
“Well, I guess that I can choose to work only if I want to?”
I was shocked by the responses, so much so that I turned the question on to myself. What did retirement mean to me?
Did it mean I was going to work at a desk for 40+ years and cross my fingers that I had accumulated enough money while keeping my desired lifestyle in check that I could one day throw my hands up and say, okay, that’s it, I’m retired?
I don’t know about you, but that sounded like the worst case scenario in my head.
Here’s what did sound exciting to me:
- Being able to work from anywhere in the world so I could travel at a moment’s notice.
- Having multiple streams of income that I could tap into and tap out of based on market demand, my own personal goals, and the amount I wanted to work or not work.
- Having a chunk of money squirreled away (not $1.4 million or whatever my retirement projection told me) so I could take breaks between work and not lose sleep.
- Having most of my revenue come from doing work that I love to do so I could see myself doing it forever.
That’s when I realized – I’m not looking for early retirement, I’m looking for financial independence. And this is really what my clients are looking for too.
Here’s what exciting. The freelance life is the absolute quickest and best way to get to financial independence. You have the flexibility and control to make your own hours, create and find your own work, and to choose your rates.
It may feel like less of a safety net than working a 9-5 and getting a steady paycheck, but really, it’s a thousand times less risky than counting on one person or company to supply your entire source of income.
Lose a client and you lose part of your revenue. Lose your job and you lose all of your revenue.
There are three simple steps to creating financial independence and doing it sooner rather than later:
- Develop multiple streams of income
- Save a chunk of everything you make
- Indulge in only the things you truly value
This is definitely easier said than done, so let’s dive deeper into each of these:
DEVELOP MULTIPLE STREAMS OF INCOME
Notice I did not say it has to be passive income. I think we get caught up in thinking that our income needs to all come from some entity over there making money for us while we chill on a beach.
That sounds nice and all, but really only for so long. Then I’m itching to start getting back to work. I hope you all have that feeling when you think about your day to day.
Developing multiple streams of income simply means that your money isn’t coming from just one source. That could look like:
- Having several medium-size clients instead of one or two big clients.
- Tiering your services into different packages to appeal to different demographics.
- Offering online courses in addition to your one-on-one work for customers who are looking to pay a lower price point.
- Creating a monthly retainer model for ongoing services.
- Speaking or hosting workshops (the best part about this one is that you’re also marketing yourself at the same time!)
It could also be mostly passive and completely unrelated to your field. For instance, I don’t live in my whole house – I rent out an upstairs unit so they help pay for my mortgage.
I also list my home on Airbnb when I’m traveling. When my travel schedule gets less hectic, I plan to list my place on dogvacay.com and watch other people’s dogs when they’re traveling.
Developing multiple streams of income just means getting your hustle on a little, especially when you’re starting out. It’s the crux of freelancer life.
SAVE A CHUNK OF EVERYTHING YOU MAKE
In the beginning, a chunk could mean $20 in your first month. The amount doesn’t matter so much as building in the habit of saving while you’re ramping up your income. Think of this money is going towards the greater good of you getting to financial independence sooner rather than later.
Creating a habit of saving a chunk of everything you make means instead of trying to accumulate some kind of insanely huge amount of money to spend in 40 years, you’re constantly just saving as you go.
It will also prevent serious lifestyle creep.
There are a few ways you can think of this:
- Save a percentage of your income every month. Because your income will be variable, choosing a percentage to save is usually more manageable than an amount.
- Find your Minimum Viable Income (MVI) number. Figure out exactly the amount of money you need to squeak by for the first 6-12 months and save every dollar you make over that amount.
- Choose an income stream that all goes to savings. Some of my clients have been able to live off their part-time job and save all their freelance income.
Others have an income stream that comes in sporadically so they can’t count on it for their living expenses. If you have an income stream you feel you can dedicate entirely to savings, I would go this route.
Grow your savings until you hit about 6 months’ worth of living expenses. It won’t necessarily be steady or consistent growth (because, hello, we’re freelancers), but it’s a good target number.
Keep this money in cash and use it to expand your business or get through low-earning months.
Once you have more than 6 months’ saved, it might be time to consider putting some money into an investment account, as long as you don’t plan to touch it for the next 5-10 years. I’ll save the details on this for next month’s blog post :).
INDULGE IN ONLY THE THINGS YOU TRULY VALUE
I know when I had a full-time job and was getting a regular paycheck, the consistency of the money coming in plus the grind of the 40 hour work week meant I was a little more frivolous with my money than I could have been.
Getting a steady paycheck lulls you into a sense of security that’s hard to shake. It means you don’t question where you money is going because it feels like it will always get replenished.
Whether you’re working for yourself now or looking the make the transition soon, start asking yourself why before you make every purchase. You don’t have to change your behavior or your habits, just become more aware of them.
I started doing this a few years ago, in preparation for transitioning into freelancing full-time, and suddenly, shopping for clothes mattered less and I canceled my Seamless account after shedding a tear for all the money I spent ordering meals in that I don’t even remember eating.
I now do semi-annual clothing swaps with a group of girlfriends and get a free new wardrobe twice a year. I make most of my meals at home and eat an amazing meal once or twice per month.
The best part is though, I have way more money socked away so I can travel regularly throughout the year because this is what I learned really matters to me.