What Does Freedom Mean to You?

Welcome to this week's edition of The Weekly Trail Report, where we share,

1 Story, where real stories of architects and engineers meet tailored financial strategies,

1 Actionable Tip, to provide actionable insights and guide you towards financial success,

1 Financial Term, to demystify key concepts and empower your decisions.

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1. Story: Steven Discovers His Freedom

What does freedom mean to you??

It’s an important question to know the answer to, and one that not everyone stops to think about. When I first met Steven he was a successful engineer, who in spite of making a good living was frustrated with his finances.?

“I’m just tired of feeling like I’m not getting anywhere!” He exclaimed.?

“Well where is it you’re trying to go?” I asked him.

He paused, “What do you mean?”

“Well,” I said, taking another look through his documents, “money is just a tool we use to accomplish tasks or goals. So what is the thing that money can or will help you to accomplish?”?

He paused, clearly flustered by the question. “We all need money to live,” he said eventually.?

“That’s true,” I agreed, “but you’re living right now, and you’re not satisfied. When I look through these documents I don’t see any clear strategy you’re currently using for your money and no obvious problems so I wonder if part of the issue is that you haven’t gotten specific enough about what you’re working towards.”?

He shook his head, “I don’t know—where would I even start?”

“Let’s try this,” I replied, “why don’t you tell me what freedom means to you? I want you to imagine you don’t have to worry about money anymore—no matter what it is you want to do, you have plenty of money to do it. That’s financial freedom. Tell me what that would look like for you.”

Steve began to hesitantly share what he would do with his hypothetical riches, and with encouragement quickly became more enthusiastic with the thought experiment.?

Here’s what he shared:

1. Wake up whenever he’s done sleeping?
2. Enjoy a leisurely morning with coffee out on the deck and cook breakfast with his wife and kids
3. Pack things up and take the family out to the lake to ride around on the boat for the day
4. On the drive home they stop for burgers, and the kids fall asleep in the car?
5. After they get home, the kids go to bed and he and his wife lay out in a hammock in the back yard and watch the stars

“Okay,” I said, “so the next step is to talk about why that isn’t the life you live right now. What is different between that day and a typical day in your life?”

“Well we don’t have kids,” he replied.

“Okay, great start,” I said. “But that's not something I can help with unless it’s a financial choice.”

Steven laughed, “We also don’t have a boat. And I can’t see the stars from my backyard. I also don’t get to wake up when I’m done sleeping and just go to the lake anytime I want.”

“Now we’re talking,” I said, “so that’s freedom. That’s what we’re going to make your money do for you.”

“I don’t see how that could be possible,” Steven replied.

“Well, like I said, knowing where you’re going is the first step towards getting there. And now that you know that part, it’s just a matter of making the numbers agree. That’s what I’m for.”

And so we got to work curating a plan. Our key objectives (in order) were:

1. Purchase the dream property (which was the current barrier from having children).
2. Make work either fully optional or only part time for both Steven and his wife.
3. Have enough disposable income to make bigger purchases like boats and other toys for the lake.

We did a deep dive into their combined finances to put together a three stage financial plan that would help them check their goals off the list:

1. Stashing Cash: stage one focused on stashing as much discretionary spending as possible, and putting as much money as possible into a high yield savings account for the down payment on the dream property. Steven and his wife had been consistent about contributing to their retirement accounts throughout their careers, so we didn’t need to worry about this strategy undercutting stage two.?

2. Triple Compounding: stage two focused on compounding their wealth as quickly as possible to set them up for part-time work or early retirement.

3. Preservation: stage three was a dedicated investment plan with a defense-first strategy. The goal being to grow their hard-won assets as quickly as possible while ensuring minimal backwards progress. This would be essential for maintaining a high discretionary income after early retirement.

After our conversation, when Steven looked through the rough outline of the plan, “well I sure feel like I’m going somewhere now!”

“That’s awesome,” I said, “now it’s just a matter of continuing to make progress in that direction!”

2. Actionable Tip: Define Your Freedom

Do you know what freedom looks like to you??

If not, it’s time to figure it out. Understanding your vision of freedom is crucial to achieving it.

Start by planning your ideal day, hour by hour. Compare this dream day to your typical day.?

What are the differences??

How close are you to living your ideal day?

Identify the changes needed to transform your typical day into your dream day.?

Often, the gap is due to a lack of time or money.?

Next determine how much money you need for the items you have identified.

With this clarity, you now have a defined vision of your freedom.

3. Financial Term: Net Worth

Your Net worth is the total value of all your assets minus your liabilities (debts). It provides a clear snapshot of your overall financial health and progress towards financial independence.

When your net worth equals 25 times your annual spending, you have likely reached a point where your assets can generate enough income to cover your expenses, allowing you to live without relying on a job or other sources of income. This milestone indicates you have effectively bought back your time.

Happy Trails,

Ryan

Disclaimer: We employ fictional characters to illustrate financial concepts faced by individuals in the architecture and engineering industry. Any resemblance to real persons, living or dead, is coincidental. While the stories are inspired by our experiences, the specific details, circumstances, and outcomes mentioned are entirely fictional and created for educational purposes only. Real client information is strictly confidential and never disclosed without explicit consent. Our aim is to provide relatable examples for educational purposes, respecting the privacy and confidentiality of our clients.