How to Measure Backwards for Mental and Numerical Financial Freedom

What is true financial freedom? Can you define freedom with a number? Is financial freedom achieved if you can simply save a million dollars and retire at 40? Unfortunately, while this is a common “goal” for today’s standards, it’s difficult to put a true numerical value on financial freedom. The work to be and FEEL free goes deeper than that, and it starts with measuring backwards.

Measuring backwards to reach financial freedom

Defining Financial Freedom

Financial freedom seems important to define because almost everyone–consciously or unconsciously–wants to be financially free. Given the choice between thinking about money constantly, and living a life where money is no consequence, it seems obvious what most people would choose. 

So is financial freedom the ability to be free of financial stress? In many ways, yes. While the world of typical financial planning wants to put a number on financial freedom, it’s more than that. True financial freedom starts with your mindset. 

You might think that being mentally free comes last–-the result of reaching freedom in the numerical sense. However, studies have shown that you can’t put a number or an “end goal” on mental freedom. In Shawn Achor’s book The Happiness Advantage, he reveals his research that shows happiness drives success, not the other way around. The wealthiest, most successful people in the world may still find themselves in mental chains of their own making. No number in the world can fix a Scarcity Mindset. 

Achieving Mental Financial Freedom

Mental financial freedom can, and must, be found through a Prosperity Mindset. Through the latter, people tend to act and react out of fear. Financial decisions made out of fear rarely end well. 

When acting from a Scarcity Mindset, people often make choices that hinder them in the long run, such as:

  • Reducing monthly cash flow and savings potential by making larger loan payments
  • Locking money away in a qualified plan, only for money to be eaten away by taxes
  • Missing out on opportunities due to a lack of liquidity
  • Paying in cash, in order to own something free and clear, at a significant opportunity cost

While these actions are not inherently bad, fear tends to incite quick action on financial practices that feel familiar. The problem is that these are actions that rarely generate wealth. However, truly wealth-generating options can feel unfamiliar and, therefore, wrong. 

The key to finding mental financial freedom is to first look at everything through the lens of opportunity. This requires you to install some faith in your finances, and know that where there’s a desire for something, an opportunity exists. When you seek these opportunities and allow yourself to believe in them, finding work that is both enjoyable and profitable can occur. 

Furthermore, looking through the lens of opportunity can help you slow down and examine your financial choices through the 7 Principles of Prosperity. On your journey to wealth, faith and confidence should be your top priority. These ideals can help guide you, ultimately, to financial freedom. 

Man using calculator to measure backwards with money.

What is Numerical Financial Freedom?

This is the big question that everyone wants to know, and the real answer is less satisfying than the assurance of a prescribed number. In reality, that number doesn’t exist. Many typical financial talking heads suggest that you save $1 million. And because this is a seemingly massive number, it’s easy to accept it and move on, because surely that’s enough.

However, this can lead to confusion and poor habits. Primarily, this instills the belief that if you save $1 million, you can retire comfortably and never look back. Not to create panic, yet this is not a realistic benchmark. Inflation and taxes can quickly erode this type of wealth, and it’s unlikely to last as long as you expect. 

If you want to retire early, say 40 or 50, you’re taking an even larger gamble. That money may need to last you fifty years or more. Simply taking $100,000 a year can only last you ten years–-taxes, fees, and inflation notwithstanding. If you leave the workforce in the meantime, it can be difficult to jump back in and build up an income again. 

Numerical Financial Freedom is Assumption-Based

The real issue with numerical financial freedom is that so much of it is based on assumptions, and those assumptions often err on the side of too little. Financial professionals assume life expectancy to be your 80s or 90s when data shows it’s probable to live well beyond that. 

Financial projections often assume that $100,000 now is going to be as effective in 30 years, despite inflation suggesting otherwise. Over time, your expenses can go up, all the while the impact of a dollar is going down. At just a 3% inflation rate, $60,000 today can look like $33,220.55 in just 20 years. This isn’t pessimistic, it’s just realistic.

If you rely on assumptions of what will be “enough,” you’re selling yourself short. Instead, aiming to save as much as possible can get you much farther and increase your future opportunities.

How to Connect Mental and Numerical Freedom

More important than a “magic number” to save toward, is creating good habits and systems that support wealth for your whole life. Saving into an emergency AND opportunity fund, for example, can help you to look at your financial reserves more positively. If your money is not merely for a “doomsday” event, saving money becomes more exciting. Then, making your savings happen automatically turns it into a habit. 

Finding work you love and enjoy, even 80% of the time, can give you momentum to work for as long as possible–rather than retire into uncertainty. Work you love tends to feel less like work, and generating an income no matter your stage of life helps you build sustainable wealth. 

A mindset that cultivates faith and peace can help you to feel prosperous regardless of your Net Worth or income. When you work from the basis of a Prosperity Mindset, money isn’t about “how much,” it’s about how you use it to create more opportunity. 

Learn to Measure Backwards

If you’re struggling to ground yourself in a Prosperity Mindset, one of the best things you can learn to do is to “measure backwards.” 

So much of the financial industry is about projecting forward into the unknown. The assumption-based methods can make you feel defeated when you think of all the hurdles you must seemingly “climb” to reach freedom. This view on finance can drain your faith and make it that much harder to feel like you are financially free, right now

This is why it is so critical to measure your progress backwards. Measuring backwards is a way of looking at the progress you’ve made over your lifetime, to give yourself motivation and real numbers with which to work. These are real numbers, in your life, that you can use to track all you have accomplished. 

What can you measure backwards?

  • How much liquidity have you created?
  • What percentage could you save, over time?
  • How many new assets or life insurance policies have you acquired?
  • Did your accounts rise in value, and by how much?
  • What tax benefits did you seek, and how did they improve your finances?
  • How much did you learn about your finances? How much did you teach?
  • Are you prepared for Death Day?

When you do this, you learn to appreciate your progress and use it as a springboard for creating more income, wealth, and savings. 

How Can We Help?

If you’re ready to take the next step with your finances, we’d love to hear from you. The Prosperity Thinker’s team is here to help you build your very own emergency/opportunity fund using whole life insurance, so that you can create more certainty and install faith in your finances. Please get in touch with us or email we*****@pr****************.com to get started.

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