Impending Obstacles to Achieving Financial Independence

Posted on February 8, 2011

Everyone would like to be in a position where they didn’t have to worry about money. That’s called financial independence! The problem is, there are a large number of predictable obstacles that stand between youngsters entering the workplace and oldsters leaving it with the security of knowing they have provided for the rest of their lives and won’t have to struggle in retirement. Most of these obstacles fall into four categories: Transportation, Children, Retirement and Silent Killers.

Transportation includes cars, trucks, motorcycles, recreational vehicles, boats, planes and other modes of travel. Everyone has transportation needs throughout life. Most people will own several automobiles or light trucks, and some will have one or more of the other vehicles. This is a known fact, which makes it something for which you can plan and prepare; if you don’t it becomes an obstacle.

Children present obstacles to financial independence, which like transportation can be anticipated and estimated. When children get old enough to drive they will want a car. Parents often help them with their first purchase or make it for them. College tuition is another big expense that comes with children. So are weddings, especially with female children. These can be quite costly and become major obstacles for parents who ignore them until the need arises.

Retirement looms far into the future, which makes it easy for young workers to ignore it until it’s too late. Programs like Social Security, Medicare and company retirement plans provide a false sense of security and discourage starting a savings plan at an early age when it can return the greatest benefits. In the beginning when earnings are limited, finding the motivation to set aside money that won’t be needed for decades is nearly impossible. The mantra is, “I’ll wait until I get a raise, a promotion, a better job, etc.”

This type thinking leads to a spend everything now lifestyle that becomes so ingrained it leads to the silent killers of credit card and other consumer debt. When living paycheck-to-paycheck, there is no cushion or buffer to absorb large or unexpected expenses. When these arise, people habitually meet the needs by incurring debt. This leads to a recurring cycle of debt that can increase rapidly. Many times the debt load becomes so burdensome that it results in bankruptcy. You can’t buy prosperity with consumer debt.

The secret to avoiding these impediments is to start early. You know they are coming, so why not develop the habit of living on less than what you earn and setting aside money now so you won’t have to go in debt later? Granted, the amount you save might seem small when compared to the predictable needs you anticipate arising, but developing the habit of saving will make you or break you financially as you grow older.

It’s always easier to move up in life than to come down. By living below your means, and saving for anticipated expenses, you don’t become accustomed to a standard of living your earnings won’t sustain. The expenses associated with transportation, children and retirement are real, not imaginary. They will occur! You can’t avoid them! The longer you put them off, the greater the chance that you will subject yourself to the silent killer of debt by financing them.

It takes earned income to make the payments on consumer debt. This forces you to lower your standard of living. Transportation is an expense you will have all your life. You’re going to have to pay for it one way or another. If you pay for it first, by saving, the interest you earn is a reward for planning and it reduces your cost. If you finance it, the interest you pay becomes a penalty for failing to plan and it adds to your cost. The cost difference between planning and saving versus waiting and financing can be huge and prevent you from ever achieving financial independence.

The expenses of children are different from transportation expenses because they don’t (or aren’t supposed to) continue throughout life. If you start early and save for a child’s first car, college tuition, wedding, etc. when the time comes to pay the expense, the money is there. Once the expenses are paid, your standard of living can improve by the amount you had been saving instead of being reduced in order to make payments on loans.

Here’s another fact! Social Security, company retirement plans and Medicare won’t provide financial independence in your golden years. If you think they will, you might as well plan to work until you die. Starting young and saving small amounts regularly throughout your working years can provide the supplemental income needed to turn Social Security into financial security.

Here’s a tip! The theme throughout this article has been to save for anticipated expenses if you want to achieve financial independence. This tip requires developing the three Ds of success. You must have the Desire to achieve financial independence, you must acquire the Discipline to make the required sacrifices and you must possess the Dedication to stick with it until you achieve the goal. It takes all three Ds, to be successful. One or two won’t get you there. As the old Chinese proverb says, “Man sit in chair with mouth open for very long time waiting for roast duck to fly in.”

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