Personal sovereignty means everybody has the right to pursue their desires, and reap the rewards of their efforts.
How does money relate to this? Having money doesn’t automatically give this to you, and it’s not required to have it. But being financially secure strengthens your personal sovereignty and positions you for long-term success as you go about your work.
Years ago, I was in downtown Seattle. I came upon a beautiful sculpture of Chief Seattle, a Suquamish and Duwamish Chief in the Pacific Northwest, with an inscription that reads:
“That destiny is a mystery to us, for we do not understand when the buffalo are all slaughtered, the wild horses are tamed, the secret corners of the forest heavy with scent of many men and the view of the ripe hills blotted by talking wires. Where is the thicket? Gone. Where is the eagle? Gone. The end of living and the beginning of survival.”
Chief Seattle was replying to a solicitation from the US government to buy the land where his tribe lived. The last sentence hit me like a ton of bricks.
When we’re young, all we do is live. Kids play, explore, and learn. They’re unencumbered by utility bills, mortgage payments, and 9 to 5 jobs. Up until they turn 18. When it comes time to go off to college, an insidious shift begins. Student loans are taken out. Upon graduation, the bill comes due and payments must begin. They sign a lease for an apartment and get a car loan. And they have to find a job to pay their bills; often a crappy, soul-crushing job. This is when the shift happens. The end of living and the beginning of survival.
When we have to do work we don’t enjoy, to earn money to pay for a suboptimal lifestyle, our personal sovereignty is greatly reduced.
Maybe this isn’t the end of the world if it’s a temporary condition. But for far too many of us, it’s not temporary. It’s permanent.
My goal is to help you maintain, increase, or reclaim your personal sovereignty. Life is way too short not too. I’ve been helping people become financially secure and get on the path to financial success for over 20 years as a financial advisor. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
Here’s what we’ll cover:
- What compromises our personal sovereignty?
- How to increase or get it back
- How to maintain your personal sovereignty
Let’s get started.
What compromises our personal sovereignty?
Both internal and external sources can challenge our personal financial sovereignty. Stock market crashes, inflation, recessions, geopolitics, and legislation can all have adverse effects. But we don’t control those things. Therefore, there’s little value in focusing on them.
Rather, we should allocate resources only on things we have (some) control or influence over. When we have a high level of personal financial sovereignty, we position ourselves for success. Think about it like this; when you stay ready, you don’t have to get ready. Let’s talk about the self-inflicted wounds to avoid.
Credit card debt burdens the average American. With interest rates over 20% on this type of debt, it can prevent us from pursuing our most important financial goals and objectives, cause stress and anxiety, and keep us trapped doing jobs we dislike.
While I’m most concerned with consumer debt (credit cards), we also make giant errors when we buy “too much” house, or overspend on vehicles. Every time we decide to allocate money in one place, we’re also deciding not to allocate it somewhere else. When we overspend on our homes and our cars, we limit our ability to save and invest for other goals like retirement.
If you’re in debt, you need to do whatever it takes to get out. If you’re not currently in debt, stay out of it. In service of that, you can access our Get Out of Debt course for free.
When we live paycheck-to-paycheck, we’re essentially broke. Operating our finances like this means we’re putting everyone else’s priorities above ours, and results in no progress towards our goals and objectives. We’re treading water. More likely, we’re falling behind.
The remedy to this is getting a handle on your cash flow and creating a household budget. Once you take these important steps, you’ll have an accurate picture of where you’re spending your money, and what changes need to be made.
Bad investment decisions
Compound interest is one of the most beneficial forces as we pursue our investing goals. It allows our gains to grow unencumbered by taxes. Put another way, gains continue building on top of gains. But what happens when lose money?
In order to recover from negative returns and get back to even, it takes a greater amount than we lost. Percentages tell us that a 10% requires an 11% gain to get back to even. A 25% loss requires a 33% gain, and a 50% loss requires a 100% gain to get back to where we were.
The lesson here is this; don’t lose money. How do you do that? Don’t speculate or invest more than 5% of your investable assets in any one investment. The prescription for long-term financial success is a well-diversified portfolio. You can accomplish this using mutual funds and EFTs (exchange traded funds).
Inaction and or procrastination
Money has time value. The longer we wait to pursue our financial goals, the harder it becomes to reach them, and the more we need to save and invest. You’ve heard the saying, “The best time to plant a tree was 30 years ago. The next best time is today.” This is true of investing.
However old you are, now is the time to get started.
Failure to plan
“Financial plan” is a loaded term. But it needn’t be. A financial plan can be as simple as this; decide how much money you’d like to have at a certain point in the future, and work backward to determine how much you need to contribute today. For each of your financial goals, put a plan together to make it happen.
How to increase or get it back
I want everyone I come into contact with to get whatever they want financially. If you want to get rich, great! Interested in starting a business? Wonderful. Simply want to stop worrying about money and find peace of mind? I’m here for you. But I know none of these things are possible until you have financial security and personal sovereignty. Here are the 7 steps for making it happen:
- Know your “facts.” When talking about personal finance, your facts are your current financial situation, meaning your cash flow and budget.
- Know yourself. It’s imperative to get clear on your beliefs about money and your goals and priorities.
- Set your initial emergency fund. Get $1,000 saved in an account separate from your every day checking account.
- Pay yourself first. Enroll in your company’s 401(k) or open an IRA and begin contributing.
- Grow your emergency fund. Get one month’s worth of living expenses saved.
- Pay off credit cards. Develop a plan to eliminate credit card debt and execute the plan.
- Complete your emergency fund. Get six months’ worth of living expenses saved.
I’ll never say these steps are easy. They may take you a long time to complete. But it will be worth it. What’s at stake is your life and you’ve only got one. Money won’t bring you happiness or fulfillment, but struggling with money will guarantee you pain and frustration. Following these steps will position you for success.
How to maintain your personal sovereignty
If you’re immunocompromised, the common cold can kill you. If you’re broke, a $1,000 expense can be ruinous.
My grandfather grew up on a farm in South Dakota during the Dust Bowl and Great Depression. They chopped wood all summer long. They did that because if they didn’t, they’d freeze to death in the winter. The time to address our health isn’t when we’re diagnosed as prediabetic, it’s now. The time to focus on our personal sovereignty is also today. Here’s what’s required:
A commitment to personal excellence
In order to get where you want to go, you need to be at your best. Odds are, there are other people relying on you, or there will be some day. Adopt the mindset that the world expects more from you than it does from other people. “Do your part by doing your best” means committing to personal excellence.
A commitment to lifelong learning
As you learn new things, your potential increases. When you stop learning, it flattens or decreases. When you commit to becoming a lifelong learner, you commit to constant improvement.
Making decisions aligned with your goals and values
You need to become a master at prioritization. We have finite resources, so how we allocate our most important resources of time, attention, and money are critical. Keeping your goals and values top of mind will help guide your decision making.
We want control, influence, and options. While money doesn’t guarantee those things, a lack of money limits them. It’s not what you have, but your ability to pursue what you desire. That’s personal sovereignty.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
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