Wednesday, March 21, 2018

Financial Freedom and Comfort

Which option is better: is it better to have maximum freedom over how one uses their time, or is it better to give up some of that freedom in order to have more life comforts?

Or, to put that question in a more tangible form, would you rather not have to work for a living (but you can if you choose to, and you can freely quit whenever you like) but have a worn-down car and a fixer-upper house, or would you rather have to work for a living but have a nice car and a nice house?

I think that my financial journey really involved a change in my answer to that question. Right now, I’d prefer maximum freedom over my time; at an earlier stage in my life, I would have preferred the nice home and nice car. At some point around a decade ago, my answer switched, and that change in that answer triggered a very different approach to finances.

The thing to remember here is that this isn’t an either-or question – it’s much more like a spectrum of options, much like the spectrum of personal finance that I recently discussed. You can choose an extreme approach toward freedom and live a life that’s extremely minimalist, but which gives you almost complete freedom over how you use your time and energy. On the other hand, you can choose an extreme approach toward momentary comfort and make all choices oriented toward what will make your average moment as comfortable and pleasurable as possible, which requires a great deal of money, which thus requires giving up a lot of freedom over your time choices.

Most of us will find some spot somewhere in the middle, between the two extremes. We’ll make some frugal choices and go without some of the less important comforts, but we’ll still have a lot of perks and comforts in our life. At the same time, most of us still have to work, but we don’t have to work constantly or at a career path that will kill us young, and we have some free time each day and some additional time on the weekends to do whatever we want.

What I’ve found, based on my own experience, is that most people who start to think about their personal finances are those who find that they’re closer to the “comfort” end of the spectrum than they’d like to be, and they want to nudge things closer to the “freedom” end of the spectrum. They’re stressed out by the financial requirements and professional requirements in their life, which is restricting their personal freedom in ways that they don’t like, but they’re currently at a level of comfort that they might struggle to dial down from.

The challenge, of course, is that most people want to see significant change quickly, and they achieve this by moving rapidly down the spectrum toward the “freedom” end. They become highly frugal and very diligent about their finances. They give up a lot of creature comforts and start building an emergency fund and paying down debt (which improves their personal freedom).

However, people often realize that they’ve dialed too far the other way and end up moving themselves back toward the “comfort” end of the spectrum, often right back to where they were at before.

Another problem is that comfort can have a “dulling” effect in that it can persuade you to avoid taking any kind of risk and to stop working hard. If you’re truly comfortable, you stop pushing toward your full potential in life. Often, the only thing that shakes people out of that sense of comfort is the idea that the comfort is truly at risk – in other words, they see that they actually have little freedom and that shocks them into action.

For me, the best personal finance strategy is to keep tinkering with things and figure out the exact place you should be on that spectrum between freedom and comfort. This, of course, relies on the idea that you have at least enough financial freedom to keep your head above water – you can keep your bills paid – and that your basic needs are met.

How do you do that, though? How do you find the right balance between freedom and comfort for you in practical terms? How do you find the right spot for you on the spectrum of personal finance without jumping way too far in the wrong direction? Here are some of the strategies I use.

First, I do a lot of thirty day challenges, trying out specific techniques and strategies. There’s almost no change that I can’t easily hold to for thirty days, and thirty days is long enough to figure out for myself whether that particular change is right for me.

A “thirty day challenge” is simply a commitment to try a specific life change for thirty days. For example, I might decide to make only meals at home for thirty days, or I might decide to eat vegan for thirty days, or I might decide to devote an hour a day to a particular activity for thirty days. It can be almost anything you imagine, but it’s a great way to give a trial run to new lifestyle features.

In a given month, I’m usually running two or three thirty day challenges in different areas of my life. At the end of the month, I usually decide that one or maybe two of them is worth keeping on a permanent basis and the rest are discarded or modified for a future thirty day challenge.

What I have found is that repeated challenges are slowly guiding me toward the best life I can have for myself. I’m never staying in the same exact place because of those challenges, but as I retain the ones that click and discard the ones that don’t, I’m slowly inching toward my perfect place on that spectrum.

Second, I have an “automatic” emergency fund, and it’s pretty healthy. Each week, a surprisingly healthy amount is transferred out of my primary checking account into a savings account automatically, and that money serves as an “emergency fund” of sorts. It does serve as protection against true emergencies, such as a car breakdown, but it also serves as protection against the risk of making adventurous life choices in the moment.

For example, knowing that I have plenty of cash to pay for the consequences of downsides emboldens me to try doing things for myself (more freedom) that I might otherwise just pay someone else to do out of fear of messing it up (more comfort). I’ll try an audacious home repair, for example, or I’ll invest in an opportunity that presents itself in the moment. I used my “emergency fund” recently to buy a person’s entire trading card collection, which I knew I could flip for a substantial profit with several hours of time invested. That’s an opportunity that comes with financial freedom, one that’s denied to me if I’m too far down the “comfort” end of the spectrum.

At the same time, having a healthy emergency fund is a comfort in times of trial. I don’t freak out if the car doesn’t start, which is a real comfort, for example.

Having that emergency fund, then, actually gives me some leeway in the moment to decide whether I want to be a little further down the “freedom” part of the spectrum (doing a challenging and potentially damaging home repair, investing in something on the spur of the moment) or I can enjoy some comfort (having cash in hand to deal with an abrupt emergency, taking advantage of an opportunity for a meaningful splurge). I achieve this by having a very healthy emergency fund and contributing to it constantly and automatically.

Finally, I use my spare time to figure out avenues of personal comfort and joy that don’t require sacrifice of personal freedom. In other words, I spend quite a bit of spare time dabbling in new interests with minimal expense, seeking out things that will excite me and draw my passion without drawing down my bank account.

Each and every day, I set aside some time for leisure, which is often filled up by already-existing hobbies, but when those don’t scratch an itch for me, I use that time to explore new things that I haven’t tried before. For example, I recently got into lettering and calligraphy in an effort to make inspirational handmade wall hangings for my home office, so I spent quite a bit of time with just some papers and some colored ballpoint and gel pens practicing lettering and faux calligraphy. The cost was minimal and I got to really dig into a new area of interest to see if it was a good fit for me (I think I don’t have adequate hand-eye coordination to do it well) while also bonding with my daughter as she spends two or three hours after school most days engaged in drawing (I often sat right next to her as I worked on faux calligraphy and lettering).

I’ve found that finding new areas of interest that excite me is a powerful avenue to personal comfort, because the maximum level of personal comfort I’ve ever found is simply being able to get in the “flow” of working on something. Being in the “flow” simply means that you’re so engaged with the thing you’re doing that you genuinely lose track of time, and to me, getting into that state as often as possible is the best source of personal contentment and happiness and comfort.

Finding ways to get in the “flow” without spending money is perhaps the most powerful tool I have in terms of finding the perfect spot for me on the spectrum between freedom and comfort. Such states, to me, are the embodiment of comfort in life, and finding a way to get in the “flow” without spending much money is incredibly powerful, because it allows high levels of comfort without sacrificing any personal freedom.

Try experimenting with these strategies to see what works for you. Try out some thirty day challenges and explore some life changes. Automate your emergency fund so that you have cash for both emergencies and opportunities. Set aside time to explore new things in life, particularly low-cost ways to dip into a “flow” state. You’ll find that doing such things is a powerful way to find the perfect balance between freedom and comfort in your life, keeping money in your pocket while finding a joyful way to live.

The post Financial Freedom and Comfort appeared first on The Simple Dollar.


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