Unlocking Your Financial Freedom

Unlocking Your Financial Freedom

October 27, 2023

Oftentimes when we talk about investing, we refer to two different categories of people, those who are just starting out and those who are in or near retirement. Both of those groups have very obvious needs which makes them an easy audience to speak to. However, what about the people and families who are somewhere in the middle? What about the 40–55-year old’s who are in the middle of their career and have a spouse and family to think of? Quite often in these situations, the individual has done at least some planning and saving and are now left wondering, “what do I do next?”

                Usually when someone asks this question what they are really asking is, “how can I know that I am on the right track?” Knowing if you are on the right track really depends on what your goals for the future are. This can very wildly from person to person yet regardless of your goals, financial independence will play a key role in helping you pursue them. In today’s post, lets talk about some steps you can take to put yourself on the road to financial independence in your “mid-career” years!


Managing Cash Flow

                A key number to get under control while aiming for financial independence is cashflow. A good place to start is by having a good understanding of your necessary monthly income and expenses. How much do you make and how much do you absolutely need to spend each month? Obviously, the goal here is to have more money coming in every month than there is going out. In order to accomplish this, you may need to cut out some unnecessary spending. Having a positive cashflow is the cornerstone of financial independence.

                One of the items that can seriously cut into your positive cashflow is high interest debt. Almost all of us have some form of debt which we pay on monthly and it probably isn’t realistic to pay off all of it (think of your mortgage for example). However, targeting debt like credit cards and car loans can be a great start! As a rule of thumb, start with the highest interest debt as that is the debt that is going to cost you the most long-term.

                Before moving on from this step, consider the following question. If you lost your income for 3-6 months, would you be able to pay the bills? Financial independence isn’t simply about planning for your future retirement but rather it is also concerned with your ability to handle emergency situations in the hear and now. Which is why it is important that you save a portion of your positive cash flow in cash for use when the unexpected happens. The general rule of thumb is to keep 3-6 months of your necessary expenses in an emergency fund.

Investments for Long-Term Growth

                Now that you have your cash flow under control, where should you be investing your money so that it can one day support you in retirement? When pulling money from your retirement accounts it is always good to have options. The only way to ensure that you have options is by saving intentionally now, prior to your eventual retirement. While this can get very detailed, for now let’s just focus on the two main “buckets” that you are likely to draw from in retirement.

                The first bucket that should be available to you in retirement are “pre-tax” dollars or money that you invested prior to paying taxes on them. The most well-known example of this type of retirement investment is a company 401(k) plan. In a 401(k), your contributions are taken directly from your pay and deposited into your account. This means that when you withdraw funds from your 401(k) in retirement, you will have to pay taxes on the full amount of your withdrawal. For some, this is a huge benefit as they are often in a lower tax bracket in retirement than when they were working full time. For others this can be a burden if they are already facing a large tax payment at the end of the year. This can also have an adverse effect during times of volatility in the market if you have a need for a fixed income from your account.

               On the flip side, the second bucket that should be available to you in retirement are your “after-tax” dollars or money that you already paid taxes on prior to investing. The best example for this type of account is a Roth IRA. In a Roth IRA, your contributions are made after you receive your paycheck. This is an individual account which means that you open the account and make your contributions, not your employer. The exception to this rule is a Roth 401(k) which some employers offer as an additional option to their employee retirement plan.

               The benefit of having this bucket in place is that contributions grow, and can be withdrawn, completely tax free in retirement (which the IRS says is age 59 and a half). This can be a huge benefit if you find yourself in a situation where you require income but want to avoid taxes. In addition, this can be a better place to withdraw money during times of market volatility as you will not need to take out additional funds to cover your tax withholdings when the market is at a low point. When it comes to how much you should contribute and to which account, we are here to help!


Risk Management

Once you have started building a nest egg for yourself, the natural question is how do you protect it? One tool for managing risk in your finances is insurance. In the middle of your career, the types of insurance most applicable to you will be life and disability income insurance.

        Everyone has heard of Life insurance before in some capacity. The point of Life Insurance is to calculate the economic value of the person being insured and to provide a sum of money in the event of that person’s death. While conversations surrounding death can be difficult, we often advise people to look at Life Insurance in a positive light considering the fact that you are using it to ensure that your loved ones are taken care of in some sort if you were to pass away. This money in many cases is used to pay off a family’s mortgage or to pay off other burdensome debts. Rather than a somber topic, Life Insurance can genuinely be seen as a gift of love to your family or other loved ones to put them in a better financial position than they otherwise would be.

        Disability income insurance insures your most valuable asset – Your ability to earn income. Not to be confused with Accident or Critical Illness policies that pay a sum of money when an accident occurs or an illness is diagnosed, disability income policies cover your earned income. Two of the most common types of DII are Total Disability and Partial Disability Insurance. Total Disability insurance pays the monthly benefit if you become totally disabled and are unable to work in any occupation. Partial Disability pays a portion of the monthly benefit if you are partially disabled and have lost income but are still able to work part-time. For example, if you could only work 20 hours a week, a policy that covers partial disability may pay half of your total disability benefit. Individual, non-group, disability income policies will generally insure no more than 80% of your monthly income. Individual coverage can be written to fill in the gaps left by Group Short- and Long-Term Disability policies. Individual disability insurance pays after a waiting period is satisfied, usually 30, 90, or 180 days. Once a claim is approved, monthly payments may continue for a stated number of years or to age 65. Costs are determined based on your age and gender, health history, income and occupation and sometimes certain hobbies or travel may increase cost.


                Achieving financial independence is no easy task but it starts with taking small steps in the beginning and middle of your career. Step one, master your cash flow by understanding your income and expenses – having more money coming in than going out is the cornerstone of financial independence. Step two, tackle high-interest debt to free up more resources for your future. Step three, build an emergency fund, so you're ready for any curveballs life throws your way. With your cash flow under control, it's time for step four: strategic investments for long-term growth. Consider both pre-tax and after-tax dollars, like a 401(k) and Roth IRA, to provide options in retirement. Lastly, safeguard your nest egg with life and disability income insurance. These tools ensure your loved ones are protected and your ability to earn income remains secure. Let's embark on this journey together; contact us to ensure you're on the right track to financial independence!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.