I look back on the days when Sarah and I were dating with fondness. We didn’t have much money then but we were eternally optimistic about the future. Our evenings were almost always free and we usually spent them together doing something fun.
We didn’t worry about the future because we didn’t feel like we needed to. It felt huge and limitless and boundless. We had very few real responsibilities – ourselves, each other, and maybe a few family obligations. We were excited to take the first steps into our career, but we didn’t really know where that would lead, either.
We spent money. A lot of it. We didn’t see any reason not to – after all, our futures were bright and we didn’t really have any responsibility. We both dove into challenging jobs and overcommitted ourselves in our professional goals, often leaving us tired at the end of the day and looking for excuses to go out every night and do something fun.
Guess what? Times change.
When I first made the decision to turn around my finances, I was inspired by our infant son. He was so tiny and so completely dependent on us. I needed to take care of him. It didn’t take a rocket scientist to see that, financially, we weren’t doing a good job of it.
When I made the choice to jump to full-time freelance writing, we had a two-year-old boy and an infant daughter in our home. My job had left me feeling distant from them, causing me to miss out on things like my son’s first step and my daughter’s first smile. I wanted the flexibility to be able to go on my children’s field trips and to be there with a smile on my face when they got home from school.
Sarah and I have dreamed for a long time about having a big house in the country. It’s something we have thought about since we were first dating during our very early college years. We wanted a nice little home with some woods in the back and a lot of solitude.
Guess what? Times keep changing.
Today, our children are older. They have financial needs, of course, but they’re simply not as reliant on Mom and Dad as they once were – and I don’t want them to be reliant. They can generally take care of themselves for long periods, finding ways to entertain themselves and get themselves drinks and snacks. They can clean some of the house quite well and are capable of doing things like filling and running the dishwasher.
They’re still happy that Dad is around when they get off the school bus each day, but they’re now happy to do things on their own when they get home. All of our children have good friends near our home, including close friends just across the street. We live on the edge of a small town where we’re very close to cornfields and trees though they’re not quite in our backyard. Sarah and I have strong relationships with our neighbors. Overall, our motivation to move to the country just isn’t as strong as it once was.
So, what has changed? We no longer hold that home in the country as a near-term priority, for one. It’s still something that Sarah and I want, but it’s not really something that our children want, and when you add into that our strong relationships with our neighbors, it becomes a lower priority. We still have significant savings put aside for buying that country home, but we’re not actively searching for it and we’re not saving nearly as much as we once were.
I’m still glad to be able to see my children off to school each day and be there when they get home, but it won’t be terribly long before that becomes less of a priority. Our children already have evening activities some days and there are some activities that already go on directly after school. They’re also nearing the age where they can be home alone for a while after school if necessary. Thus, the schedule flexibility that I once valued so highly is slowly dipping in value.
On the other hand, Sarah and I are both pretty committed to financial independence. Our family growth and children growing older hasn’t changed anything about our desire to save up and get ahead. If anything, we’re more committed to financial responsibility than ever before. We’ve seen enough to know the positive changes it can bring in terms of our life choices, our stress levels, and our professional opportunities.
These transformations all have an impact on our personal finances.
For starters, our home savings has been becoming more long-term each year. Our additional savings have gone straight into index funds because we haven’t anticipated buying that country home in the near term for a while. And, as things sit right now, I’d say there’s virtually no chance of a purchase in the next five years; we’re probably looking at a 10- to 15-year timeframe for that switch, near the point where our children are moving out.
In fact, our major focus for saving and investing today is on financial independence. Again, this is a goal that’s at least 10 years out (unless something radically changes). We’re hoping to reach this threshold when Sarah and I are between the ages of 45 and 50.
So, what’s changed about our personal finances? Since all of our major goals are in the “10 years or more” timeframe, almost all of our investments are going into stock market index funds. We’re investing in a mix of domestic and international stocks mostly through Vanguard’s Total Market indexes. As our timeframe begins to get closer and closer, we’ll begin to shift our contributions into other things, like bonds and Treasurys, to add stability.
Another question is what “financial independence” really means for us. Does it mean full retirement? Or does it mean something else where we still have a regular job of some kind? Honestly, we’re not sure. We may actually find ourselves working in some capacity at that point. Because of that, only some of our investing for financial independence is going into tax-advantaged accounts. We’re stocking our 403(b)s and Roth IRAs, but that’s not the be-all-end-all of our planning. We’re also putting some of our money into ordinary taxable accounts, because that’s what we’ll tap for our country home and also what we’ll tap if we end up just working at a low-income career (such as an employee of a charitable nonprofit).
So, what’s the moral of the story here?
First of all, a person’s financial choices are deeply connected to their goals. Without clearly established goals, you will always struggle in terms of making good financial choices for you and your family.
For example, if your goals are long-term and you’re saving your money in a savings account, you’re just choosing a very painful path to get there. Also, if your goals are coming up in the next few years and all of your money is in the stock market, you’re running a giant risk of having your savings collapse before you cross the finish line.
That’s why it’s important to have big goals in your life. It’s not that your life suddenly loses all freedom and you engage in this monolithic path toward your goal, but that you have some strong sense of where you’re heading and you can make choices that guide you there.
Just as importantly, you need to be aware that goals change. You’re not going to hold the same long-term goals that you held even a year or two ago. They’re going to shift over time. Goals that were central to you even a few years ago – like our goal of moving into the country – will slowly decline in relevance. Other goals that were barely on your radar a few years ago – like our goal of financial independence – will slowly become ascendant.
How can you prepare for that financially? The best strategy is to always save plenty. Save more than you think you’ll need because you’ll probably be glad to have it no matter what your goal ends up being. Also, don’t put all of your eggs in one basket. For example, don’t just save for retirement – if you have other goals, some of your savings should be outside of your retirement accounts.
I’ve found that the most valuable strategy of all is to communicate well with those around you and think about what they’re telling you. Let them know when you feel that things are changing and that your goals might be changing, too. Listen to them as well. Keep in mind that your nine year old is no longer the little toddler that loved it when you made your hand into a “spider” on his high chair tray. His needs are different now. Your spouse is no longer the new kid on the block at work, but well established in her career. Her needs and goals have changed, too.
If you pay attention to those changes and make choices that are flexible for the future by not putting all your eggs in one basket and by saving as much as you can, you’ll be in good hands no matter what the future brings.