“The idea of financial freedom can be complicated but breaking it down and approaching it with preparation and collaboration will make it possible for you to craft your own vision.”
“Most people who want to be rich, they’re scared to declare that for themselves, They’re afraid that they don’t deserve it. You are worthy of your hard work and deserve to reap the benefits from it.”
The news headlines always seem to be full of successful entrepreneurs who took a few dollars and turned them into a multimillion-dollar business. They provide us with inspiration for our own journeys, but it’s important to know they are not representative of every entrepreneur’s financial success.
In fact, the average yearly salary for an entrepreneur is less than $100,000. Depending on where you live in the United States, it will likely fall closer to $50,000-$60,000, according to the U.S. Small Business Administration. But for many people, that is enough. That’s because their goal is financial freedom. Financial freedom doesn’t mean you have millions of dollars squirreled away (but if that’s what you want, that is a perfectly acceptable goal). In its most basic sense, financial freedom means you have enough in savings, investments, and cash to afford the kind of life you want.
That version of life looks different for everyone. For one person, it’s having money to pay bills with enough leftover to enjoy what makes them happy—traveling, spending time with family, pursuing a hobby. For another, it may be what most people picture as financial success: living in a mansion, owning fancy cars, and taking lavish vacations around the world. Both are valid versions of financial freedom.
For The CoLab founders Megan Marsh and Andres Munar, financial freedom means having enough security in finances to enjoy their life. As a mother of four, Megan strives to spend time with her family and not worry about making routine purchases as well as a treat now and then. Andres’s vision and commitment to financial freedom paved the way for him to relocate to Puerto Rico. While their personal lives have benefited from running their own business, that vision of financial success is rooted in careful decisions.
“It took us a lot of tweaking, testing, and deep diving to figure out our vision of financial freedom,” Megan says. “Every decision on spending needs to be viewed in the context of growth.”
The idea of financial freedom can be complicated but breaking it down and approaching it with preparation and collaboration will make it possible for you to craft your own vision.
Create a Plan
As you take a look at your business and your life, what do you think your version of financial freedom will look like? Are you OK with living comfortably or do you have grander visions of wealth? Write down your goals because defining them gives your entrepreneurial journey a sense of direction. It’s also important to be in the right mindset because the journey to financial freedom isn’t easy. It requires discipline and the ability to see the big picture.
“I truly believe from the bottom of my heart that we can have anything we want,” Megan says. “But it’s a mindset you have to develop.”
Having a hard time picturing financial freedom? Start by asking yourself basic questions and use the answers to create your vision:
- What is it that you want from life?
- Why did you start your business?
- Why do you want to be financially free?
- What does financial freedom look like to you?
- What are some of your present challenges to becoming financially free (e.g. debt, stagnant sales)?
- What are some steps you can take to start overcoming those challenges?
- What does your current spending look like at the business and at home? Are there areas you could be saving costs?
Speaking of debt and savings, it’s vital to take stock of where you sit financially in the present in order to build toward the future. Create a list of all your debts: mortgage, student loans, car loan, credit cards, personal loans from friends and family, and any other forms of debt. Add it all up and then move on to your savings. List all your savings accounts, stocks, company stock-matching programs, company retirement-matching programs, and retirement plans as well as income from your salary and any side-hustles.
Now that you’ve compiled all that information, use it to define your financial freedom goals and guide your path to reaching those goals. If paying off debt is your goal, figure out a strategy to free up and direct more of your income to making payments. If debt isn’t a concern, deploy an aggressive savings strategy. No one’s path to financial freedom will be the same, so take time to create one that will work best for you, your business, and your lifestyle.
When taking this approach, it might be tempting to let the line between your business and personal finances blur. It’s your business, so you can take a little bit here and there outside your salary to cover your personal costs right? As many experienced entrepreneurs will tell you, the best thing you can do is keep your personal and business finances separate. It can be difficult at first because it’s likely you’ve poured personal funds into your enterprise to get it started, but it’s an important goal to attain. If you want financial freedom, you can’t treat your business as a personal cash register. That habit could lead to financial instability down the line.
Stay on Track
You’ve defined your financial freedom goals and have taken stock of your personal finances. What comes next? Commit to reaching your goals.
The path forward will depend on your business. For Megan and Andres, it meant creating systems to ensure they were staying on track. Depending on the size of your business, it’s possible for transactions and expenses to slip through the cracks. As part of their business operations, Megan and Andres sit down monthly to review their finances and evaluate if there are opportunities for growth and opportunities to cut expenses. It can be time-consuming but is a necessary part of their financial freedom strategy.
If crunching numbers isn’t one of your strengths, you might consider bringing in an entrepreneurial mentor or coach to help you review your books and create help systems and strategies to put you on the right path. If your budget allows, another option is hiring a financial planner. They can help you develop a comprehensive financial plan for your business and personal objectives. If you decide to add a financial planner to your team, consider their experience, investment management approach, and compensation platform. This person should be able to provide objective advice that will help you reach your financial freedom goals.
Reset Your Mindset
No matter who you add to your team to help you, collaboration is a key component of reaching your goals. Other people provide support and accountability, which in turn serve as motivators for many entrepreneurs. Whether it’s a coach, business partner, or spouse, having someone in your corner that can push you to stay on track can make all the difference in some cases.
They also can be a sounding board because it’s easy to get trapped in your own head when it comes to making business decisions. If you’re not seeking advice, ideas, and support from others, the thoughts you have end up bouncing around in the echo chamber of your mind. This can be especially unhelpful for small business owners struggling to define their financial freedom due to their preexisting attitude on money. Is it hard for you to admit to others what your vision of that freedom looks like? What if your aspirations are to make as much money as you can, but the voice in your head says you don’t deserve it? Money often comes with negative associations, which can leave people tiptoeing around what they really want.
“Most people who want to be rich, they’re scared to declare that for themselves,” Andres says. “They’re afraid that they don’t deserve it. You are worthy of your hard work and deserve to reap the benefits from it.”
Your vision of financial freedom will look different from everyone else’s, but the important thing to remember is that it is your vision. Only you know what will make you feel happy and secure, and you shouldn’t feel ashamed for wanting to achieve that. Connecting with other entrepreneurs can help you overcome those feelings and challenges that stand in the way of your goals. The CoLab (@TheColabLife) and Serving Up Success groups on Facebook are two platforms where you can connect with others and share experiences and advice.
As an entrepreneur, everything you do is meant to be another step toward success. Wealth is often used as a measure of success, but without purpose and freedom, it’s just a pile of money sitting in a bank. Find your purpose, define your goals, work toward reaching them, and financial freedom will be yours.
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