Your future independence requires more than solid finances

Great outcomes look easy


Imagine the last time you saw an incredible sports performance. Maybe at a football game. On the track. During the Olympics.

One cannot help but see these performances as mostly effortless. Rare mistakes and mishaps are only reminders of the dedication required.

But what we see is the by-product of a process, the things we don’t see.

  • The training that these athletes engage in.
  • The way they eat.
  • The guidance they receive.
  • The way they rest and recover.
  • The mental preparation and exercises they use.
  • And all the things they don’t do…..

All of these things brought together in the right way, at the right time can result in victory.

But this process is rarely linear. And never guaranteed.

Athletes get injured. Burned out. Struggle with self-doubt.

The process of training to victory is long. There are periods of hard effort and rest. All of it designed to get an athlete to their competition in peak condition…and good health.

The training is the journey.

Investing for the future like training for the Olympics is also a journey. And this journey isn’t one dimensional.


The future is not linear


Your financial future is presented to you the same way you see these amazing athletic performances.

You see the results of past performance. You hear the stories of success trumpeted in the media. It all looks so easy. So clear. So linear.

The investor begins by answering some questions. Fills out some forms. And based on their metrics, and some vague goals about an unknown future they are given a portfolio.

Investing is based on a series of linear ideas.

  • The market over time always goes higher.
  • A person moves through life through various stages where promotions are anticipated.
  • Raises and other increases in financial remuneration are ongoing and increasing.
  • Inflation will increase at an average predictable rate of around 2% because it is “managed”.
  • Everyone passing through various life stages have roughly the same behaviour.
  • And you will retire at roughly the same age as everyone else.

Your future retirement assumes good health. Lots of resources. That everything will be status quo. Plus extensive travel and lots of comfort.

Of course you understand the problems with these assumptions.

Like an athlete training for a competition, things go wrong.

People lose jobs. Make mistakes. Get sick.

Life circumstances take you to task.

Personal and social problems provide mental duress and affect decision making.

The world changes constantly.

The market and your investment portfolios move around like the weather.

The idea of a linear predictable model of financial outcomes seems good looking back. But getting there may require some real fortitude.

Some training for your future. And not just your financial future.

Let me explain.


Financial independence is a part of being independent


Let’s say you are just starting out. You open an account. Fill out the forms. Choose a portfolio on a robo service.

Your portfolio structure is based on past events and future expected returns.


But what should the investor do you get themselves ready for financial independence besides this?

Maybe that’s the wrong focus.

Perhaps the question should be: what should one do to achieve overall personal independence in the future?

You see, financial independence is only part of a larger outcome of a series of decisions.

Athletes make a series of decisions to meet smaller targets and longer term ones.

For many it’s annual goals. Then there are the four year Olympic cycles.

In investing terms your life is stages that combine life events and age plotted against a long term outcome.

Single and young. Married. Kids. Middle age. Kids moving to adulthood. Education expenses. Empty nest. Winding down. Retirement. Coasting…….

But are these really realistic approaches to building portfolios and advising people?

Do they allow for much deviation?

They don’t.

Look at savers over the last 10 years. Did any model used to map pout their future take into account the possibility that interest rates would go to almost zero? And in some countries go negative?

Forcing them to either add risk when a more conservative approach was required….

Or forcing them to dip into principle because the assumptions on long term interest rates were wrong.

They had no way of seeing the future. The models used to help them get set for retirement had no way of accounting for this.

In other words, investors need to embrace the idea that investing for retirement is not linear. It seems to have a habit of being highly unpredictable.

So what can an investor do?

Your financial advisor is trained to provide you valuable investment and maybe tax advice pertaining to your investments.

But in order for those investments to help contribute to personal independence a person has to start preparing for the uncertain future in many other aspects of their life. And do so early.

In other words, long term personal independence is about training for the future. And not just financial preparation.

So how do you do that?


Retirement is an event. How you are when you get there matters


Like athletes building towards successful sports careers, everyone else can actively prepare for their present and future too.

You need good advice. Coaches. People who have your best interests at heart.

That have the knowledge and expertise to help you move along without hampering your progress.

So advice is crucial. People with savvy parents have a big advantage. But others who find great coaches or mentors can get a leg up as well.

But the idea of personal independence isn’t just about money. It’s based on being healthy, having vitality, being free to make choices throughout a life filled with uncertainty.

To achieve this you need to make good decisions when it counts, and have the ability to adjust for any poor ones that you make.

Good decisions are a by-product of thinking clearly, accessing good information, having good advice where available and being comfortable with uncertainty. Because there are few examples where one knows for certain all information or what the outcome of a decision will be.

And to make good decisions you also need something else……

You need to be healthy in the first place.

Health, both mental and physical has a significant impact on the way we think and feel. It impacts the way we perceive information and the way we make decisions.

For example when you are sick you interpret information in one way. And your decisions will be skewed accordingly.

When you are healthy and feel good, the same information is received differently. The decision of the healthy person can and will likely be completely different as well.

All decisions are emotional at their very core so understanding that your interpretation will be shaped by how you feel is important.

So how do you help to shape your decision making and emotional interpretation?

You take steps to stay as healthy as possible.


Lifestyle choices are the forgotten investment


In investing terms you are always told to keep some money aside in case of an emergency. To have some liquid assets or cash equivalents in case of an adverse event.

But too many people fail to do this with their own personal health.

When you are fit, getting sick or an injury is an aberration. Your fitness provides an advantage helping you to recover faster. It gives you the mental toughness and discipline to get back to where you were. Move forward.

(Provided you are not over training and burn yourself out.)

The healthy person will be able to interpret information better. Weather an adverse situation better. They will be able to make better decisions. They will rarely feel like they are under threat. Their path to personal independence is more likely.

Because they are investing in their future through lifestyle choices.

On the other hand when you aren’t healthy. Maybe overweight. On lots of pills. Lots of personal bad habits. Poor sleep……

Getting sick isn’t an aberration. It’s an ongoing problem. It shapes everything you do.

It creates anxiety and fear. Caution.

Every health insult brings you lower.

Your ability to perform is affected. You can never think clearly.

Your vitality is under constant threat. You are dependent on pills. Your mental health suffers.

How do you think this might affect your financial decisions, never mind all the other decisions you are making?

How might every bit of information be perceived? How will this affect every decision you make?

And most importantly, how will this shape your ability to be personally and financially independent in the future?


You own a bank. Start making deposits


Your mental and physical health are your own personal bank.

When you eat well. Train physically (I hate the term exercise but if it works for you read it here). Get adequate rest. Don’t overdo it too often. And look after social relationships you make deposits into your own personal health bank.

These deposits might be accumulating over a long period of time before you need them.

But when something happens. An unexpected event, you have something to draw from the bank.

You can manage better. Make better decisions. Recover faster and move on.

Your ability to achieve personal independence is more likely when you are making more lifestyle deposits to your personal health bank than withdrawals.

So for example you need to eat properly. Proper eating helps shape a variety of health metrics like your weight. Your recovery. Your digestion and ability to sleep. It affects your mental health.

And therefore the way you eat by itself can shape your decision making.

If you eat properly it’s also a lot easier to be active. To train (or exercise). People that eat properly don’t tend to be tired all of time. And don’t spend all of their time obsessing about food and eating.

Active people enhance their personal vitality both mental and physical. This reduces stress and anxiety.

But in order to get the benefits of training or exercise, one needs to rest.

Appropriate rest between efforts and after hard work is essential to clear thinking, health and vitality. You can only “burn the candle at both ends” for so long before something goes wrong.


Be personally independent, not just financially independent


Having a good lifestyle long term is like having an all-weather investment portfolio.

It gives you a margin of safety when various things inevitably go wrong. Allowing you to make better decisions under conditions of increased uncertainty and duress. The kind of decisions you need to make for future independence.

Because retirement is an unknown event. Something in the future that is a target without any known parameters.

No one knows at what age you will retire or even if you want to then. Maybe you feel you can’t afford to financially. Or mentally.

Looking ahead to retirement, an event you have no experience with, there is no way of knowing what that will actually be.

You may have lots of money but spend much of your time managing pain and chronic disease.

You may be financially independent but personally dependent limiting your choices. Altering your decision making.

Investors are counseled to balance risks with expected returns. To diversify their portfolio. To build for the future by staying the course and adjusting periodically.

You are advised not to do anything rash and emotional. To be rational.

And if you are going to be rational about your finances, doesn’t it make sense to pursue personal independence through rational long term lifestyle choices?

To balance the risks of everyday life, aging and unexpected circumstance with choices that will help you weather them better. To help you incorporate financial independence into your overall personal independence.

Allowing you not just to assume that the future will be bright, perfect and unencumbered. But rather to build for that future in your personal circumstances while you build your financial future.

Financial independence is simply one part of a bigger picture.

Personal independence should be your ultimate goal.


Tristram Waye

Freelance Financial Copywriter