Declare Your Financial Independence

June Lantz Walbert is a USAA Certified Financial Planner and lieutenant colonel in the U.S. Army Reserve.

It's that time of year. Life suddenly brims with backyard barbecues, ice chests, and fireworks. As we celebrate our country's Independence Day, I can't help but reflect on what must have been simpler times back in 1776 ... at least financially. There weren't interest-only mortgages, car loans, title loans, credit cards, or payday lenders.

When making your declaration of independence this July 4th, consider making it your mission to let financial freedom ring for you. Remember, the Revolutionary War lasted eight years; winning financial liberty will not be done overnight either. To execute this operation you must be properly armed with knowledge, organization, discipline and patience.

Three goals to shoot for include living within your means, eliminating debt and paying off your mortgage.

Shoot for more money than month. This is another way of saying live within your means. Too many do just the opposite -- there's more month than money, That often equates to reaching for the credit cards or digging into savings. The cornerstone of financial liberty, living within your means, involves controlling impulses and putting off instant gratification. In other words, organize your spending around a budget where income exceeds expenses and savings! I fear that few take the time and effort to develop and execute this critical tactic. Once you've done it, you'll find that you have money in your bank account before making a purchase. Bottom line: Use credit cards for convenience, not to finance your lifestyle. If you live within your means, your debt may actually start to disappear.

Attack high interest rate debt. The British tried to blockade us into submission during the revolution, and debt can certainly be a "blockade" that keeps you from reaching your financial goals. I consistently campaign against carrying high interest credit card debt because it's a waste of money and it makes good financial sense to be debt free. This point is worth stressing considering the national average credit-card interest rate is 14.75%. Rather than spending chunks of your pay on past expenditures, imagine the financial freedom of having that money in your monthly budget instead. There are no quick fixes, so develop a plan to eliminate your debt and execute it with military precision and a hefty dose of patience.

Burn your mortgage. "Should I pay off my mortgage?" I get this question often. From a financial independence standpoint, the answer is clear -- yes, it makes sense to pay off your mortgage and burn the note! "But I need the tax deduction" folks object. Listen up. The tax deduction simply lowers the cost of the mortgage, it doesn't eliminate it. A tax break is hardly comparable to knowing the roof over your head is yours. The lower your monthly expenses, the more financial freedom and flexibility you'll enjoy, especially in retirement.

Independence as a country didn't come overnight, and yours won't either, but it's a fight worth fighting. Mission complete.

June Lantz Walbert is a CERTIFIED FINANCIAL PLANNER practitioner with USAA Financial Planning Services. She is also a lieu­tenant colonel in the U.S. Army Reserve with 20 years of service. Walbert's basic branch is Air Defense Artillery. She writes a weekly advice column, "Ask June" on military.com. Follow June @AskJune_usaa.

USAA or its affiliates do not provide tax advice. Taxpayers should seek advice based upon their own particular circumstances from an independent tax advisor.

This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.

USAA Financial Planning Services is a service mark of USAA that refers to the financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, (known as USAA Financial Insurance Company in California, Lic. No. 0E36312), a registered investment advisor and insurance agency and its wholly owned subsidiary. Certified Financial Planner Board of Standards,, owns the certification marks CFP ® and CERTIFIED FINANCIAL PLANNER TM in the U.S. which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Read/Post Comments (4) | Recommend This Article (11)

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  • Report this Comment On July 05, 2011, at 6:01 PM, ddaydetroit wrote:

    I have saved my money and now have enough to pay off my mortgage. I have been starting to study finances and I talked to a financial planer and the financial guy told me I would be better to invest the money and that.

    I would make more money a month then what the principle costs me a month ? I think I am going to pay off my mortgage. I would like to here others peoples opinions on this. P.S. I have no credit card debt live with in my means except for the nice vacation I am taking soon

  • Report this Comment On July 06, 2011, at 8:05 AM, JCashForever wrote:

    Great advice.

    I agree with (1) and (2), but I have to comment on (3).

    I think (3) is a function of the mortgage interest rate. For argument sake, suppose that the interest rate on the mortgage was 0%. Would I try to pay off the note early? No, at the very least, I'd put the extra money in the bank to earn whatever interest it could, knowing that I'm coming out ahead.

    On the flipside, suppose the mortgage interest rate was 50%. Would I try to pay it off early? Yes, because the interest rate is higher than what I could reasonably expect to make in other investments.

    In today's mortgage environment, where a 30-year fixed mortgage can be had for less than 5%, I think it is reasonable to allocate the extra money towards investment instead of paying down the mortgage early. For example, a reasonably conservative portfolio in stocks should produce an average return of more than 5% per year over 30 years.

    If you're philosophically/morally opposed to debt, then by all means pay down the mortgage early, but the rational bottom line is that (3) makes sense only in certain interest rate environments. I would hesitate to make it a hard-and-fast rule.

  • Report this Comment On July 06, 2011, at 2:29 PM, AskJune wrote:

    I think it depends on want you want ultimately and how much risk you're willing to take. Actually "owning" your home provides mega peace of mind. If a retireee could eliminate that big bill during retirement, the numbers typically crunch much better from a financial planning standpoint. Of course, this advice depends on the proximity to retirement and if you plan to remain in that home during retirement. The markets always carry risk, but the reward can be great. Your choice!

  • Report this Comment On July 06, 2011, at 5:24 PM, Gregeph wrote:

    I would add learn to value a business and then resolve to exercise patience and look for opportunities where you can buy a good business for a cheap price. It's sound easy, but like anything else of value, it requires hard work and discipline.

    Buy a few good businesses at a good price and then hold on while they compound. If you're investing in a taxable account, you'll benefit from a free loan from the government in the form of deferred taxes.

    Don't waste more of your precious time on unproven short-term strategies. This is the way to create wealth. My blog on intelligent investing is focused on the necessary skills you'll need to master. http://gregspeicher.com/

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