Smith Club of San Francisco
and Marin

The Path to Financial Independence:  Getting Started. 
What do you want and how could you possibly make time in your busy life to get it?

By Alison Clarke Brown '87

Wealth is having assets so that an individual can make her own choices: a cash fund so that you can leave a job you don’t like or a partner who is not good to you; a college fund so your kids can attend the college of their choice; your retirement fund. 

Financial independence is knowing what you want, that you have the assets to provide for it, and your plan for adverse times.

What do you want?  Women live longer than men and spend twice as many years in retirement. In too great numbers, we still expect that our retirement will be provided by our spouse/employer/government and we don’t take control of planning for it.  The reality is that women earn less than men and tend to cycle in and out of the workforce resulting in lower retirement savings and benefits.  Additionally, more than fifty percent of women older than 50 find themselves single due to divorce, death of a partner, or choice. 

Not surprisingly, therefore, the majority of women consider "financial security" to be one of their top priorities, yet most women feel they do not have the knowledge to address financial matters.

Here is your first step to knowledge and taking charge of your finances.  At the end of this article is a checklist to get you on the path to financial independence.  The checklist is easy.  Progressing through the steps is the challenge.  The hardest step is the first one, getting started.   In this article, let’s start with the first step:  What do you want?

Your goal will influence what you need to do, how you do it, and how much work it will take to accomplish it.  Do you seek security?  Do you seek stability?  Incredible riches?  How much money do you want to have?  The more you want, the more you will have to work to create it.

It’s easy to say, “I want $3,000,000.”  But does just saying it motivate you to go get it?  Not for most of us.  You need to know the deep underlying reason for what you want.  What is going to motivate you to choose to spend your limited free time on learning how to work toward financial independence?  Ask yourself, “Why do I want to be financially independent?”  Do you want to be able to walk away from a boss who is not appreciative of your excellent work?  Do you want to know that your children will be financially secure if you were to die tomorrow?  Do you want to retire to a South Seas island in ten years? 
Write your answer down.  Look at that answer and ask yourself, “Why do I want that?”  Keep asking yourself this question until you have the answer that will drive you to follow through on the next 9 steps.

The Path To Financial Independence:

1. What is your financial independence goal?  The dollar amount and the emotional reason(s) behind it.
2. What are your income and expenses?  Do you have an excess or a deficit?  Build a financial independence component into your budget.
3. What is your net worth?  Net worth equals assets minus liabilities (debts).  Are your debts productive debt, i.e. helping you purchase an investment that will generate passive income?  If not, get rid of them.
4. Start educating yourself:  Types of investments (financial - stocks and bonds, real estate, and other), taxes, insurance
5. Build a team of advisors: You need to understand what you’re doing and why, but you don’t need to do it all yourself.  Find someone you trust, someone you are comfortable with, and who will spend time educating you.
6. Start investing.  Buy something.  You learn the most by ownership. 
7. Protect your wealth:  What if you lose your earning power?  What if you can’t take care of yourself?  What if you die?
8. Direct your wealth:  Wills, Trusts, Powers of Attorney, and Guardians
9. Keep learning.  Attend seminars to learn about different types of investments.  Learn more about taxes and insurance.  As you gain confidence and wealth, you will need to know more information and you will be able to absorb more information.
10. Monitor your portfolio – Your wealth (should you re-position your portfolio to reduce risk?), your protection (do you need to revise insurance coverage?), and your advisors (do they still serve your needs?)

The majority of people spend more time in one year planning their annual vacation than they do in a lifetime planning their financial independence.  Which do you want to give more priority?

Allison Brown is a freelance writer and business consultant interested in making the world better for women.  She was a commercial banker for fifteen years and left that career to give back to her community.  Her first step is to help women achieve financial independence and protect themselves.  She welcomes your emails with any questions about this article or your financial independence, cababyx3@yahoo.com.

© 2008 Allison Brown