EP 223: Freedom Isn't Free: Smart Strategies for Financial Independence

Hey, everybody, this is David Chudick, and in the spirit of the fourth of July holiday that we're in the midst of, we want to talk about independence.

Now, as on July 4, 1776, America declared its independence, but today we're talking about how you can declare financial independence.

Now, one thing I can tell you is financial freedom is not always directly related to income.

In my two decades of being a financial advisor, I've worked with plenty of clients and prospects who had really high incomes but did not experience financial freedom because maybe they weren't controlling some of the things that they could control.

So today we're talking about your financial independence, and I hope that you enjoy this episode.

And here we go.

Welcome to the weekly wealth podcast.

I am certified financial planner David Chudick.

This podcast and and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

So come on and let's enjoy this journey together.

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And I hope that this podcast and our social media content is a little piece of that puzzle in your life.

All right, everybody.

So today we are around 4th of July in 2025, and we want to talk about financial freedom and what is it really?

So financial freedom is not necessarily the same thing as being, quote, rich or having high income.

True financial freedom is control over your time and decisions.

True financial freedom is the ability to make choices not based on money alone.

And true financial freedom is feeling secure regardless of market or or business cycles.

Now, according to lending club in 2024, did you know that 66% of earners over $100,000 still live paycheck to paycheck?

Let me say that again.

66% of high earners, which is they define it as over $100,000, still live paycheck to paycheck.

Okay, another statistic by lending club in 2024 said that 54 income households defined as greater than $250,000 per year, also live paycheck to paycheck.

So you might be thinking, if I earned a quarter of a million dollars per year, I'll be able to have some financial freedom, won't I?

I don't know.

What if you add maybe a house that's twice as much as what a reasonable house for you would cost.

What if you add two very expensive SUVs so you have $200,000 SUVs at 2 or 3 or $4,000 per month car payments each?

What if you add the private school for your kids?

What if you add the boat?

It's hard to buy a boat right now for less than $100,000.

What if you add all of those things?

You might be in a situation where you have very little financial money.

Margin.

So margin.

Let's talk about margin.

A way to speak about margin is the fuel for financial freedom.

So very simply, margin is the difference between what you earn and what you spend.

One of the formulas that I always speak about with my clients is income minus expenses has to equal greater than zero.

So income minus expenses has to equal greater than zero.

We can debate how much, but the math just has to work.

High income does not necessarily equal high margin.

And without margin, here's a couple things you can't do.

You can't invest, you can't save money, and you can't say no to bad opportunities and you can't say yes to good opportunities.

So here's an example.

Let's say you're a business owner making $400,000 per year, but you're spending $390,000.

That equals feeling stressed, feeling stuck, feeling no freedom, feeling things like that.

But let's look at another example.

Let's say you have just a husband and a wife and they both have reasonable incomes and maybe the income is 150,000 per year and they're spending 120,000.

So now they have $30,000 left over and that is their margin.

Make margin a goal in your life.

What we have to remember is as well as we can make any bud, you take a Dave Ramsey budget and you do that zero based budget and you account for every dollar that's going to go out.

Well, you can't always account for everything.

You can't account for something breaking.

You can't account for needing parts for your car.

You can't account for business being down always.

But if you have margin, financial margin, that creates the ability to handle those unexpected expenses, those unexpected decreases in revenue, and all of those kind of how is your financial margin.

Margin is where peace, growth and freedom live.

And margin gives you time, freedom, investment, power, emergency flexibility, and confidence in downturns and you can build margin by having some lifestyle caps.

You can use bonuses and windfalls for investing, not for inflating lifestyle.

So one of the things that I see get in the way of financial margin for my clients and really for society in general is something we call lifestyle creep.

And this is a freedom killer.

Lifestyle creep is when your spending grows along with your income, but your wealth doesn't.

So here's some things that are lifestyle creep.

Maybe you're upgrading your car every few years.

Maybe you're doing $10,000 vacations because we just deserve it.

Maybe every time your income increases, maybe you get a raise or a promotion.

Maybe every time that happens, you're increasing your spending by that same percentage.

So what if you work for a major corporation and you get a promotion and you're now making 20% more per year, you probably do deserve to enjoy some of that 20%, right?

You work hard, you made yourself promotable.

But if you spend that entire 20% on increasing your lifestyle, you don't end up in a better position financially.

The average American, according to the U.S.

bureau of Economic Analysis, they spend 10% more when their income increases by 10%.

So that's what we call lifestyle creep.

And lifestyle creep can be a killer.

So as your income rises, lock in a percentage to wealth building and then, yeah, enjoy some of the rest.

As your income rises, have some experiences with your family, have some experiences with the people that you love, do the things that you enjoy.

And yes, have some stuff.

Stuff is cool when you can afford stuff that is appropriate for you.

So look at lifestyle creep and do a lifestyle audit.

Find some of your unnecessary fixed expenses, see if you can eliminate those.

And that can create margin for you.

And you'll be glad that you have margin when there is a downturn in the economy, when you have an unexpected expense, or when revenue is down.

If you are a business owner, quick question.

When's the last time you stopped to ask where is my money actually taking me?

If you're a business owner or high earner who's too busy to figure out if you're on the right path, we have created something just for you.

It's called the 10 Minute Wealth Vision.

Call a quick, no pressure zoom where we'll talk about your biggest financial question and help you get one step closer to your ideal future.

No pitches, no fluff, just clarity, confidence and direction.

Grab your spot now@weeklywealthpodcast.com vision.

That's weeklywealthpodcast.com vision.

Your vision deserves 10 minutes okay, so.

We'Ve covered margin, and margin is one of my favorite words to use with my clients, because margin creates peace of mind and margin creates freedom.

Now let's look at some other strategies that can help high earners and the mass affluent.

But really these would tend to work for anybody.

So how can you automate your investing?

Maybe you have a 401k through work, maybe you can just automate investing into a brokerage account.

But how can you make it to where you are consistently paying yourself in the form of your investments?

Now, for most of us, if we have to physically write a check every month to an investment account, we're going to tend to not do it.

But if we take that decision away and we automate it, we can tend to grow our nest egg and our investment balances.

But be careful not to have too much of your entire net worth inside of retirement accounts.

Now why do I say this?

Your 401s, your IRAs, those sorts of plans, they have some penalties if you want to get to the money, if you can get to it at all.

So if your goal is to be financially independent before age 59 and a half, you are going to want to have some assets outside of the retirement plans.

So this can be just a simple brokerage account, it can be real estate that produces income, it can be any number of different things.

But I've seen it over and over.

I've seen scenarios where people have 70, 80, 90% of their net worth tied up in their 401k and in their IRAs, and they simply cannot access this money very efficiently until they're age 59 and a half.

Let me know if you have any questions about this.

Email me davidarallelfinancial.com but if you're in a taxable brokerage account, you are setting yourself up for some potential pre retirement freedom.

Now have you thought about how to use your income to create wealth, not just lifestyle?

So if you're a business owner or if you have a job and you get a paycheck, you can either spend your money on stuff.

And again, stuff is not bad, but that gives you like an immediate bump in your lifestyle.

Or you can spend some of your money on creating wealth.

So what are some ways to create wealth?

Rental real estate is a great way to potentially create wealth, right?

If you save up a down payment, you buy a house, you rent it.

Now yes, you'll have all of the risks involved with tenants, but in theory the tenant will be paying your mortgage and your home will be going up in value while the loan balance is going down in value.

And you are building wealth that way you can buy commercial real estate in roughly the same way again.

Your securities, your dividend paying stocks, your bonds, all of those things can create wealth.

As you have income coming in, let's ask ourselves how much of this should be used to build wealth and how much of it should be used to improve my lifestyle.

When you're making those decisions consciously and not just reflexively, you can tend to build wealth wealth over time.

Now, I love the business owners and we have to talk about the business owners because I am a business owner.

So what are some things that business owners can do to help themselves to have financial freedom?

Business ownership comes with a lot of risk.

It comes with a lot of reward, but it comes from risk.

And business owners need to be very purposeful.

So first thing to remember is that many business owners are asset poor and all of their net worth is tied up in the business.

So over time, as a business owner, you need to be getting some money out of the business and into other assets.

So you and your CPA and your advisor and your business coach need to be determining how much of your money should be reinvested back into the business.

And the answer is probably a lot.

But how much needs to come out of the business?

So not everything is tied up with the business.

Also, as a business owner, true freedom comes when your business runs without you.

So if you're the only source of revenue, if you're the person that has to do most, most tasks, then you don't really have freedom.

Even if you're making a lot of money, if you can't step away from the business, that is a lack of freedom.

True freedom comes when you're diversified in your outside assets and things happen right.

Business cycles take a turn for the worse.

Competition comes and there are times when your business just doesn't do well.

Now, if you have outside assets that can help you to weather that storm and continue to have freedom.

And finally, yeah, your business needs an exit plan.

If you are consciously and purposefully planning your exit, you will then have the freedom.

You can be building your business in a way to where it can sell for higher multiple when you're ready.

So some strategies for you to think about.

Make sure you're paying yourself a market wage.

Don't pay yourself too much, don't pay yourself too little, but pay yourself a market wage that the business can't afford.

And then build some business margin, but also build some personal margin.

Make sure you're Building a business that can run without you.

You need systems.

Systems are the key to freedom.

Make sure you are separating your business and your personal finances.

And be smart.

Don't just reinvest everything into the business.

Make sure you are diversifying.

And did you know that according to the exit planning institute, 83% of business owners have no written succession or exit plan?

So if exit planning is something that you've been thinking about, you can take the Value Builder Questionnaire.

So go to www.weeklywealthpodcast.com valuebuilderscore.

Take the Value Builder SC.

It'll give you an estimate of what your business might sell for at least a range of value.

It's not a certified appraisal, but it's a great starting point and it will also help you to know which of the eight drivers of value you're doing well in which you can improve.

And then you can start to build a business that is very sellable.

And they always say that freedom isn't free.

Well, part of financial freedom means protecting yourself from losses.

So have some great risk management strategies and place.

Now, risk management strategies can include insurances.

So make sure that you're speaking with a great local insurance agent about some of the ways that you might have risk exposures and ask them when it makes sense for you to transfer that risk to an insurance company through an insurance policy.

Make sure that you have some risk management strategies with your assets.

There are many ways that you can protect your assets from having major losses.

Now I'm talking about your investable assets like your stocks, your bonds and your investment portfolios and such.

But make sure that you're taking proactive steps for risk management within your life.

Everybody.

So what do you think about the financial freedom episode?

Do a lot of these make sense for you?

Do any of them maybe.

Do you struggle with them?

Does lifestyle creep get into your life?

Do you not have enough margin?

So so in conjunction with Financial Freedom Day, let's have your Financial Freedom declaration.

So this is your declaration of independence.

Let's commit to these five different things.

Let's commit to I will grow my financial margin.

So if you're a high earner, a low earner, a business owner, financial margin is a great thing.

And let's track and grow financial margin.

Number two is I will resist lifestyle creep.

So every time I get some additional money, that does not mean I have to spend it.

I need to use some of that money to build wealth.

I need to use some of that money to build margin.

Number three is I will Invest in assets that build freedom.

So as you're having income, you can either buy stuff or you can buy stocks and bonds, you can buy real estate, you can buy assets that can help you to build freedom because you'll have assets and assets really just create options.

Number four is I will create a financial vision aligned with my values.

So Walt Disney's brother said, when your values are clear, your decisions are easy.

So let's make our financial decisions align with our vision and our values, not just based on impulse.

Then finally, I'll buy back my time.

Especially if you're a business owner, you may want to hire an assistant or you may want to delegate, but also some.

Sometimes buying back your time with somebody to cut the grass and things like that frees you up to have a better quality of life.

And during that time you can enjoy life or you can use that time to earn more revenue.

All right, so let's go back and recap what we learned during this financial independence episode.

So financial freedom, it's not about being rich.

It's not about having some big number.

Your retirement account is having control.

It's the ability to say no to bad opportunities.

It's the ability to have freedom and have choices.

We talked about margin.

Financial margin is where freedom is more.

It's the gap between what you make and what you spend.

And just because you have a high income does not mean that you have financial margin.

And when you don't have financial margin, you tend to be stressed.

You tend to feel trapped.

Lifestyle creep.

This is the silent.

Well, this is basically every time you make more money, you just simply spend more money.

So when your income increases, let's not spend all of it.

Let's make sure that we are putting some of it towards wealth building and yeah, let's put some of it towards increasing our lifestyle.

We talked a little bit about the business owners to make sure that you're building systems and have lifestyle freedom to diversify your investments outside of the business and also to the mass output.

We talked about systematizing our savings, but we don't want to have all of our savings in retirement plans because they are tough to access if you want freedom before age 59 and a half.

And finally we talked about the your declaration of financial freedom.

So those are some pretty cool things that I hope that you'll take very seriously.

So here's my question to you.

What is your financial independence look like right now?

Are you financially free?

Let's figure it out together.

Schedule your 10 minute wealth vision call at www.weeklywealthpodcast.com vision that's www.weeklywealthpodcast.com Vision.

Thanks for joining me.

Have a safe and joyful 4th of July and let's work towards building a life of true financial freedom.

Alright everybody, we'll see you next week.

Investment advice offered through Parallel Financial and SEC Registered Investment Advisor able to conduct advisory business in states where it registered or exempt or excluded from registration contents contained herein or for informational purposes only and should not be construed as an offer or solicitation for investment advice or for the purchase or sale of any security, insurance or other investment product.

Foreign before we wrap it up, let me leave you with a quick bonus tip that can help you accelerate your path to financial independence and it is called the Snowball method of Debt repayment.

So if you have some debt, think about doing this.

List all of your debts, credit cards, personal loans, car payments in order of smallest to largest balances regardless of interest rates.

Okay?

Then make the minimum payments on all of your debts except the smallest one.

Take any money that you can, maybe from cutting, spending, selling something, a side hustle, overtime, anything like that, and throw it at the smallest debt until it is gone.

Then take what you were paying on that debt and roll it to the next one.

Like a snowball gaining size and speed, it rolls downhill.

This method will build momentum and confidence and studies show that people are more likely to stick with a plan when they get some early wins, even if the math doesn't maximize interest savings.

So if part of your financial freedom is paralyzed by debt, that is a simple way to quickly reduce your debt.

Alright, so now we are really done with the episode.

I hope everybody has a great week.

Thanks and let me know if you have any questions.