ST. CROIX INSIGHTS

Achieving Financial Security

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

I’ve tried saying no, but it does occasionally offer some benefits…
These days, I limit the time I spend on social media. I check to see what’s happening with family, friends, and clients, and I log off quickly. I don’t even have the Facebook app on my phone. One useful group I did find on Facebook was a retirement group where people pose retirement/investment questions to strangers to solicit advice. In many respects, I find this scary (you have no idea who these people are or what their background or qualifications are for giving financial advice), but at the same time, it’s helpful to see what different people are thinking about as they approach or experience their retirement years.

One common theme among those I interact with is that most are seeking financial security. And why would anyone not? But “financial security” looks and means something different to each of us based on our background, our upbringing, and our lifestyle, as well as what we strive for down the road.

Many times, what “security” looks like is not just a mathematical calculation but an emotional one. One recent Facebook post broke down the three levels of financial security one can achieve: financial security, financial independence, and financial freedom.

Financial security is defined as having enough income to cover your basic living expenses. It’s a foundational level that takes decades of hard work and saving to achieve, where you’ve worked for thirty or forty years and can finally put in your two-week notice and not look back. (I often hear people say you need a million dollars saved up before you can retire. The truth is, you don’t.)

Financial independence is what I think most people seek when they use the term “financial security,” but it’s hard to differentiate between financial security and financial independence. Financial independence just means having more passive income to cover your lifestyle, which includes more than the basic necessities of financial security. That might include extra income to travel once or twice a year, eat out a few times a week, and have extra spending money each month.

The third level is financial freedom. Very few people will ever truly achieve this level of freedom. This is when you have multiple passive income streams in place to create the life you’ve always dreamed of, which enables you to do the things you love while also giving back. You still live within a budget, but this level of freedom allows you additional choices on how you live.

Common to all three of these definitions is the phrase “passive income.” Passive income comes in a host of different forms, from Social Security, an income stream from your investment/retirement accounts, a pension (though this is becoming less and less common for younger people), income from a business you own, rental real estate, and so on. For some, passive income is even viewed as part-time work in a low-stress position where they aren’t taking their job home at night.

When I think about financial security, I think about time. Time to take a relaxing vacation—so relaxed you don’t adhere to a rigid timeline. Time to cook those meals that take hours to prepare and eat, take naps you don’t have to set alarms for because you slept so well the night before, and finally start to conquer that mile-long to-do list. That time to invest in ourselves is what I want to help all my clients achieve.

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Ask yourself- can my portfolio support my lifestyle in my retirement? 

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