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Financial Freedom:  Keeping that Bait on the Hook

Have you ever been in a situation in your life where suddenly your financial situation was uncertain? Or, maybe you had some large bills that needed to be paid. Perhaps, you just wanted to get a jumpstart on building an emergency fund or saving for some other goal. In times like these, a spending freeze can be a valuable tool in helping you achieve your financial goals and ultimately keeping you on the road to financial freedom.

Several times throughout our marriage, my wife and I have been in situations where our finances were tight due to the loss of one of our jobs or a period of increased expenses. During these times, we declared a "spending freeze." Together, we agreed to cut out all unnecessary expenses (obviously, we kept paying the electric bill and the mortgage). The nice thing about a spending freeze is when one of us was tempted to buy something unnecessary, the other person simply mentioned the freeze and that was the end of the conversation. (I discussed the importance of "accountability partners" in one of my previous Financial Freedom articles Keeping That Bait on the Hook.) During one of our spending freezes, I remember visiting the Apple store (one of my favorite retailers). I really wanted to buy the newest iPad and was tempted to pull out my credit card when my wife gently reminded, "I thought we were on a spending freeze." Now, I was not very happy about not getting to buy the iPad, but she was right. We had sat down together about a month earlier and mutually agreed to institute a spending freeze. I didn't buy the iPad (at least not on that day), and we moved closer to achieving our financial goal and ending the spending freeze.

Before instituting a spending freeze, answer the following questions:

  1. What is the goal of the spending freeze? Are you trying to save a certain amount, get a handle on your spending, pay off some bills?

  2. How long will the spending freeze last?

  3. Which expenses will be allowed during the spending freeze?

A spending freeze is not necessarily fun, but it can result in many benefits beyond the obvious saving of money. Spending freezes can force you to be creative in pursuing alternative, free recreational activities. You will also be forced to build willpower against impulse purchasing. You can identify places where you have been overspending and find ways to curtail those expenditures. A spending freeze allows you to prioritize your spending on the most important things and eliminate or reduce spending on less important things.

The best thing about spending freezes is that they are temporary. The whole goal is to stay laser-focused on decreasing spending enough to end the freeze. As with my general financial advice to you, I encourage you to keep your long-term goals in mind. If a short-term spending freeze can help you achieve your long-term financial goals, and ultimately financial freedom, then why not give it a try?

If you have questions or if you would like to discuss spending freezes with me, you can e-mail me at mhaertzen@wtwealthmanagement.com or call (520) 204-1058.

Sincerely,

Matt Haertzen
Matt Haertzen, CFA, CFP



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