Freedom Money is a research and behavior support system that helps people who want to accumulate enough money to one day have control over their work-life balance, based on what worked for others. It is a collaborative, moderated forum for discovering and sharing what works. It’s intergenerational, too: it’s for people who are working towards Freedom Money as well as people who have reached it and want to share their experiences for the benefit of future generations.
The core mission of Freedom Money is to help more Americans achieve a baseline level of financial security that will give them control over work-life balance when they are older:
The idea for Freedom Money came when founders, retirement and investing researchers Laura Varas and Chris Brown, were wondering whether it was actually possible, and if so what it took, to achieve a minimum level of financial freedom without having a traditional pension plan. It turns out that it is possible, and so Freedom Money is based on what real people say worked for them. There is no one expert behind Freedom Money. It harnesses the power of collective experience by comparing the behaviors of people who achieved a level of financial freedom to those who didn’t.
Freedom Money is defined as having 10 times your annual household income in assets, minus consumer debt, excluding your home. Reaching Freedom Money doesn’t guarantee you’ll have “enough” money to retire, if retirement is in your plans. But reaching it does mean that, combined with Social Security, you’ll have a financial foundation for control and independence to live your life as you see fit, working as you want or cutting back expenses to be able to afford not to work. That freedom seems to be what most people crave, and many people like the idea of seeing what behaviors played a role in helping other people succeed.
The research behind Freedom Money showed that people who reached 10X (10-times assets-to-income) were more likely to engage in a number of smart financial behaviors. Some of these behaviors are surprising, like saving in bursts, having ownership in your work or consulting a financial professional while staying involved, while others are common sense, like spending less than you earn. However, knowing what these behaviors are is only part of the battle. So Freedom Money takes the next step of identifying what smaller, everyday actions 10-Timers were taking to make these big behaviors possible. This app is designed to help you adopt more of the actions that make these behaviors possible, and stick with them.
1. Calculate Your Ratio
Step 1 in using Freedom Money is to calculate your assets-to-income ratio. Your ratio tells you two things. First, it gives you a powerfully simple goal, something that was important to 10-Timers; if you’re at 2X now, you know you need 8X more to reach 10X. Since you don’t have to reveal the income or assets that went into calculating it, it gives you a neutral measure that you can talk about with other people to enlist their support or compare notes on what actions help.
Your 10X gets harder to reach as you increase your income, so it stretches as you grow. A new runner may be happy with a 10-minute mile, but an experienced runner wants 7 minutes; a person trying to lose weight may set an initial goal, and upon reaching it, set another. If you reach 10X, try for 15X, but get to 10X first. It’s not easy, but it is doable.
Second, your ratio can let you compare how well you are doing relative to your peers. If you’d like to see how your savings stack up to others in your age range, you can review your percentile ranking relative to your age group. A rank in the 80th percentile means that your ratio is greater than 80% of others your age.
2. Learn About the 10X Behaviors and Calculate Your Independence Score™
Your Independence Score shows how well you’re doing in adopting the behaviors that contributed to other people’s success, and more importantly, your Independence Score™ is used to estimate how many years it may take you to reach Freedom Money. It also shows how much opportunity there is for you to increase your speed in reaching Freedom Money by adopting more of the smart financial behaviors. These behaviors are things within your control, as opposed to what happens to the markets.
You calculate your Independence Score™ by flipping through the behavior cards and entering some information into each about your savings and investing habits. This information is combined with your assets-to-income ratio to determine approximately how many years, on your current course, it will take you to reach Freedom Money. This information is displayed on the main screen. By the way, Independence Score™ is an even more neutral measure than your ratios, so you can also talk about Independence Score with other people.
3. Calculate a Goal Independence Score™
You may be happy with your pace of saving and investing and the time it will take you to reach Freedom Money, but if your goal is to increase your Independence Score™ and achieve Freedom Money faster, then take step 3 and cycle back through the behaviors you are not doing (or not maximizing) and utilize the condition and action cards for these behaviors to create a plan to adopt more (or improve current) behaviors. And, to help you take the day-to-day actions necessary for change, you can use Freedom Money to set reminders and alerts.
A key to adopting new behaviors is having a support network to help you stick to your plan, so we’ve included the option of sharing your Freedom Money plan with friends and family. You can also share what’s working for you and learn about behaviors and actions that are working for others in the Freedom Money forum. We encourage you to use the Freedom Money community to share ideas with other users and build a support network with friends and family, so you and your loved ones can all become more financially independent.
We hope you enjoy using Freedom Money and that it helps you reach financial independence faster. If so, please tell your friends and family about Freedom Money so they can benefit from it too, and let us know what you think at www.gofreedommoney.com.
Thank you and best of luck reaching your goal of financial independence!
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