The Boston Thesis
I recently spent four days in Boston. Connecting Boston’s revolutionary history to the concept of financial freedom is not particularly challenging. After funding and fighting the French and Indian War, the national debt of England increased by more than 75%! Being in debt up to their ears, Parliament and the King looked to the American Colonies for money. Over a ten-year period, British taxes piled up on Boston and the colonies. Undoubtedly, the early patriot’s desire for financial freedom was a unifying storyline behind the American Revolution – with debt and taxes taking the roles of antagonists.
Today, Americans are still fighting for financial freedom. History often rhymes (if not repeats) and debt and taxes just may be the most robust inhibitors to achieving financial freedom in modern-times. But first, what exactly is financial freedom? This is a tough question because there is no singular answer. Everyone is going to define financial freedom a little differently, but I like how the folks at MoneyFit define it:
“Financial freedom means having enough savings, financial investments, and cash on hand to afford the kind of life we desire for ourselves and our families.”
Having financial freedom affords benefits like working in a career that is fulfilling versus just financially necessary. Financial freedom can bring calm and confidence to one’s decision making. It means that money is an ally versus an adversary regarding life’s choices and opportunities.
The Boston Thesis is that financial freedom is possible for most Americans. History teaches us that nothing is impossible. The patriots of Boston – with infamous leaders like Sam Adams and John Hancock – were able to instigate and wage a successful war against England. With this amazing genesis in mind, it seems that Americans can beat any adversaries to achieve their goals…including DEBT and TAXES!
Just a Dash of Debt is All You Need
England’s unhealthy debt led them to foolish money moves that in turn stripped them of the Americas. Unfortunately, debt remains durable today with the average American having $90,460 in debt. Of course, not all debt is the same. Mortgage debt or student debt can actually be accretive to one’s wealth; however, too much can certainly present long-term financial challenges. Debt from credit cards, large auto loans, personal loans, and payday loans can be devastating. The problem with debt is that it easily spirals out of control and before one knows it, most of their savings are consumed by debt interest. Knowing the insidious side of debt is the best plan for preventing debt. Prevention is not always possible; therefore, debt must be managed and kept in check with strategies that are both financial and behavioral. OnTrack Wealth Management does not specialize in debt counseling, but you can click here for a free credit consulting session from a non-profit agency that may be able to help.
Taxes are Inevitable, Just Don’t Overpay
Taxes, taxes, taxes. We lament about them incessantly and yet we often do little more. Benjamin Franklin summed this up perfectly in his writing “The Way to Wealth”, considered the first American book on personal finance, when he said:
“…Taxes are indeed very heavy, and if those laid on by the Government were the only Ones we had to pay, we might more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our Idleness, three times as much by our Pride, and four times as much by our Folly…”
The lessons to learn here goes well beyond taxes, but for a moment let’s ask some incisive financial questions connected to Franklin’s quote:
- Government taxes are heavy, yet is it not true that most of us sit around idly do little about those taxes?
- Is it not true that we sometimes pridefully talk about how much money we make, but do little to actually save?
- How often do we illustrate folly about money matters without asking an expert or conducting research that would otherwise inform us?
Taxes are part of our American history of rebellion against the crown and in contemporary terms they are a despised, hazy, and confusing. In the context of financial freedom, taxes cannot and should not be ignored or cheated. Instead, they need to be forecasted and planned for in a manner that looks to minimize exposure. Achieving financial freedom is often not about hitting home runs or holes in one. It’s about having a rock-solid “small game.” Doing the small things right time and time again saves money. For example, lump and clump deductions every few years to exceed the Standard Deduction. Plan for Roth Conversions in years where your taxable income drops. Take advantage of the most efficient tax credits for children and educational expenses. Harvest capital losses to offset capital gains. These “small game” tax strategies are winners that contribute significantly to one’s financial freedom.
Conclusion
The Boston Thesis that most Americans can achieve financial freedom to optimize financially rewarding lives. It’s not easy, but it is possible! And for inspiration you just need to look at Boston some 250 years ago when ordinary and extraordinary Americans turned into patriots and took action to achieve their financial freedom. Today, the challenges of financial freedom are less about revolution than they are about attention. Our attention needs to be laser focused on building multi-year financial planning strategies. Kill debt! Minimize Taxes! Those are the modern-day rally calls for financial freedom…