How to Achieve True Financial Freedom

Consider this:  More than three-quarters of the people in the wealthiest country on earth say they worry about money.  What's more, 87% of millionaires don't feel rich.

You read that right.  For those who are wealthy, what they have is never enough.  John D. Rockefeller, once the richest man in the world, when asked how much money is enough replied, "Just a little bit more."  That's apparently a sentiment shared by today's richest man in the world and the vast majority of his cohorts.

Author and minimalist expert Joshua Becker calls this the Prosperity Paradox.  It's sad, really – the more money we have, the more money we believe we need.

If our goal of achieving financial freedom is simply to accumulate more and more money, we'll never arrive.  The finish line keeps moving, and we can never reach it.  If we think that financial freedom means we can buy whatever we want whenever we want it, we're always going to feel we're lacking.

What is financial freedom?

But what if the typical idea of wealth is all wrong?  What if real financial freedom isn't the ability to buy whatever you want, but the realization that you don't need to?

Yes, this goes against everything our society teaches.  The idea that we can be happier and more fulfilled by wanting less is completely foreign to our materialist way of thinking.

When we practice living with less, we start to see how little we actually need.  We can be comfortable while owning less.  And that realization means that we start spending less.  Suddenly, financial freedom doesn't feel like something that's only reserved for the wealthy.  It feels possible now, with what we already have.

For most of our lives, we've been taught that spending less is a sacrifice.  It's certainly what I used to believe.  I had a long, long list of things I wanted, from new clothes, shoes, and other accessories, to a remodeled kitchen, new furniture, and a hot tub in the back yard.  A bigger car.  Fancier vacations to ever-further destinations.  This list was always top of mind, and drove almost every decision I made.

In a culture that defines success by how much we've accumulated, choosing to own less may be seen as going backward.  Giving up.  Settling.  And yet... when my husband and I made the decision to own less, we gained so much.  We stopped needing two full-time salaries just to get by.  I gained the ability to homeschool our children and volunteer at our church.  Owning less made it possible for me to get back into classical singing and eventually perform all over the Sacramento area.  It made it possible for Jon to continue classroom teaching in his small school, which he loves, instead of chasing a more lucrative and (to him) less desirable administrative position.

For us, owning less didn't just mean fewer things to clean, maintain, insure, and replace.  It didn't just mean fewer distractions and more time.  It meant we could put our energy into things that really mattered to us.  Instead of using our talents and knowledge to get more money and more stuff, we could concentrate on the things we cared about.  By owning less, we gained true freedom – the freedom to make choices to go in the direction we wanted to go.

I thought that owning and spending less might feel like deprivation, but it has been the opposite.

Financial freedom doesn't begin with accumulating more money.  It begins with desiring less.

The consumption trap

Of course, money matters.  Money buys shelter, food, medical care, education.  It can be used to help others and do good in the world.  A certain amount of money (and freedom from debt) provides security and stability when illness or other emergencies occur.

In their personal finance classic, Your Money or Your Life,* authors Joe Dominguez and Vicki Robin describe what they call the Fulfillment Curve, which illustrates that every dollar you spend brings less happiness than the one before it.

* Thank you for supporting this blog.  If you buy through my links, I may earn a small commission.

If you have nothing, buying things does make you happier.  Basic food, clothing, and shelter really do make your life better.  When you have a little more money, you start spending on comforts, like a chair to sit in, a supportive mattress, a few changes of clothing.  These things add to your happiness, but not as much, dollar for dollar, as the basics you purchased to survive.  Eventually, your spending may start providing you with luxuries, like a home in the suburbs instead of a small urban apartment, a monthly massage, and morning lattes.  And you enjoy these luxuries.  They push you to the peak of the Fulfillment Curve.

Beyond the peak, your stuff starts to take over your life.  You enjoyed your sofa, so now you want matching chairs and tables.  Your book and Blu-ray collections grow from a few dozen to a few hundred.  You buy an espresso machine.  Pretty soon, you need a bigger house in a ritzier neighborhood, and all of the trappings to go along with it.  You're working longer hours and commuting further, so you don't really have much time to spend with your house and all of your stuff.  You're spending a lot more money, but you're not really much happier.  In fact, you may feel a lot of stress and a lot of dissatisfaction as you struggle to keep up with the Joneses.

The sweet spot on the Fulfillment Curve is when money has provided you with the basics for survival, a few comforts, and even a few luxuries.  Life is good.  Your spending and your happiness are balanced.  You have enough.

6 ways to find enough

Here's the truth – money can't make you happy if your increased wealth brings increased expectations.  If you never understand what enough is, you'll never be content.  There will always be something else you want, and you'll be caught in a trap, like a hamster on a wheel, spending your time and energy to make more money to buy more stuff.

The bottom line is that if you can't be content, you'll never be rich, no matter how much money you have.

What are some ways to do this?

1.  Lower fixed costs when possible.

Housing and transportation are the two biggest expenses for most people.  Downsizing to a smaller space, paying off your car and driving it for as long as possible, and maybe owning just one vehicle can create margin in your budget, which creates greater ease and peace.

2.  Resist lifestyle inflation.

When income increases, most of us spend more.  But each upgrade pushes you further away from freedom.  Instead, let increased income create more financial breathing room.

3.  Avoid comparisons.

There will always be someone who has more.  Comparisons steal your satisfaction.  You can't even enjoy what you have, because you always have new desires.  Financial freedom isn't about having the most toys – it's about being free from the need for them.

4.  Practice gratitude.

Gratitude lets you see that what you have is valuable.  It lets you focus on all the good in your life, instead of on what you think you're missing.  Gratitude strengthens satisfaction.

5.  Enjoy the simple things.

When you find joy in simplicity, every day is better.  You don't need all of the bucket list possessions, trips, or experiences if you know how to savor a walk in the park, a home-cooked meal with loved ones, a lovely piece of music, or your child's smile.

6.  Be generous.

One of the truest signs that we have enough is our ability to give.  We recognize that our lives are good and blessed, and that we have enough to share.  Generosity reminds us that our financial freedom doesn't depend on accumulating more and more, but on having a positive impact in the lives of others.

Get satisfaction.

77% of Americans may feel financial anxiety, but that's not because 77% of us are living in poverty.  Something else is causing that anxiety, and I think it's our all-consuming desire for more.  We work longer, go into debt, and worry that we're not "making it."

A simpler, more minimalist lifestyle relieves that anxiety because at last we can be satisfied with enough.  That's true financial freedom.

Related article:  How Too Much Money Can Steal Your Joy

Money facilitates life, doesn't it?  It pays for our basic needs, like food, shelter, clothing, and medical care.  It gives us the freedom to pursue education or travel, to start a business, and to someday stop working.  Money even contributes to well-being, since it can provide a sense of security, create the opportunity for personal growth, and enable the joy of generosity.

Given the importance of money in our lives, you'd think we'd be better at managing it.  Yet the majority of Americans report living paycheck to paycheck, and 70% of us are stressed about our personal finances.  We're anxious, in debt, discontented, and unsatisfied.

It's not a great way to live.

But I'm so sure that a minimalist approach to money can make your life better that I've created my Minimalist Money series to help you:

• reduce financial stress
• stop being a follower and take control of your money
• demolish your debt
• maximize your savings
• afford what truly matters to you
• feel empowered by your choices
• entertain yourself and live comfortably for less

My long-time bestseller Simple Money will be joined by a companion volume, The Wealthy Minimalist, in September.  Pre-order the e-book edition today.