This article originally appeared in the Jan-Apr 2022 issue. View the full issue here.
How often do you think about money? When you do, what do you think about?
Where do you want to be in the future financially? How much do you earn and how much do you save? What’s your level of debt and what are your plans to break free of it? Maybe you worry about how to find some cash so you can take a vacation or the best ways to save or invest.
Firefighters face a variety of daily stressors and personal finance shouldn’t be one of them. When you’re more in control of your money, you’ll feel more confident and less worried.
Finances have a daily impact on our lives. There isn’t much we do or don’t do that isn’t based on money. Go out for dinner or eat at home? Buy a new vehicle or fix the one we have? Take a vacation or have a staycation? Buy a new outfit or resurrect an old one? Sometimes, we make decisions and worry later about paying for them. Some of us like to keep up with the Joneses while others save until they feel broke, always anxious about that inevitable rainy day.
The good news is, there’s a way to live for today and save for tomorrow.
This isn’t something you have to guess at. There are simple ways to learn how to make the right decisions about the money you work so hard to make. You can make choices that will make you financially stable rather than vulnerable.
The goal is to make your money work for you!
If the right concepts are applied, financial independence is just a matter of planning: setting long and short-term goals and finding the right assistance to help you on your way.
We may spend days planning a birthday party, wedding, or vacation, but relatively little time planning our retirement, truly the most incredible vacation of your life!
Consider:
- Do you want to be debt-free?
- Do you want your kids to finish university or college without debt?
- Do you want to be able to travel or have a vacation home?
- Do you want to be free of money worries?
Envisioning what it would be like to achieve some or all the above should be enough to motivate you to create a plan.
What is My Financial Independence Number?
Do you know how much money you need to have accumulated by the time you retire to be financially independent? We all know our SIN and PIN numbers, but very few of us know our FIN number – our financial independence number. It’s critical to know what that is so you can chart your financial roadmap. It’s the most important number in our financial lives, but many of us have never heard of it. Your FIN is the amount of money you need to have working for you, so you never have to work for money again. Knowing your FIN number gives you a clear goal or target.
How Do I Find my FIN and Achieve That Goal?
Your FIN number involves a number of factors, so you might want to consider connecting with a financial needs analyst. Working through a FNA will provide you the answers you’re looking for and the adjustments you may need to make.
You’ll need to consider:
- Your age
- Current household income
- Current debt
- Current savings
- Current life and disability insurance
- Future age for retirement
- Future retirement guaranteed income (i.e. government or other pensions) and income goals
- Future debt elimination
- Future savings
- Future life and disability insurance
You and your coach will also need to think about the age at which you’d like to retire, current rates of return on investments, inflation rates, current debt load elimination, government programs, the type of investor you are (happy risk-taker or super conservative) and your goals and dreams for the future. How do you envision your retirement?
Let’s look at some of the key factors to be considered while doing a financial needs analysis to help you determine your FIN.
Life Insurance
Your understanding of life insurance should be based on the “theory of decreasing responsibility,” a philosophy that suggests your life insurance peaks along with your financial responsibilities, then declines over the course of a lifetime.
The goal is to protect yourself and your family in the event of either situation.
Savings
What phase are you in?
The longer you wait, the more you’ll have to put away each month to reach your retirement goals.
Have you taken the time to envision at what age you wish to retire? 50, 55, 60, 65?
A financial needs analysis will look at your current income and project what your income during retirement will be. A financial coach will be able to forecast what that retirement income will look like by factoring in inflation and years until retirement. These numbers will be different for everyone.
Debt
One of the biggest obstacles can be the debt you’ve accumulated. If you can eliminate that debt, you’ll have more money to contribute to your investments to help build your savings.
It’s important to take a close look at your current debt to apply concepts that can help you eliminate it more quickly than you might expect. Learning about and applying the “debt stacking concept” can not only help you eliminate debt sooner, but may also save you tens of thousands of dollars in interest payments.
First Look at Your FIN
Once you’ve determined your FIN, you’ll know justhowmuch you need to accumulate for retirement. That total may seem too large to be achievable, but with the right plan, you’ll be able to see your path more clearly. First, you need to look at how much you currently haveand what, if any changes need to be made*.*
Get Some Guidance
Working with a personal financial coach or financial planner can have a huge impact on the success of your plan. A coach will help you better understand what type of investor you are, review your current investments to see if they are set up correctly for you and your goals, and generally get you started on your path to financial independence. You want a coach you can trust who is in it for the long run, looking to build a lifelong relationship to guide you past all the pit stops along your financial journey.
Get that target set! Feel the power of knowing where you’re going and how to get there!
This article originally appeared within the Jan–Apr 2022 issue. View the full issue here, or browse all back issues in theCRACKYL Library.
