Why exactly would any sane person want to save 50% of their income and try to pursue financial independence? It’s a good question. I’ve written a bit about why I’m pursuing financial independence on my about page and on other posts throughout the blog, but I wanted to expand on those thoughts and discuss seven reasons why everyone should consider pursuing financial independence.
1. The Ultimate Unemployment Insurance
Unless you have a cushy Federal government job, employment stability has becoming a thing of the past. Of course there is unemployment insurance in case you are laid off due to no fault of your own. Meaning that if you are fired for stealing or being the office douche who spends his time harassing the ladies, then no money for you. Adding to the list of people who will not be getting any money are part-time, temporary, self-employed, and contracted workers who are also not eligible for unemployment benefits.
If you are one of the lucky ones who is eligible to receive unemployment benefits, you should be aware that the so called benefits are not very good. The average weekly unemployment check is $293. To put that in perspective, the average weekly poverty level income is $220/week for a family of one and $298/week for a family of two.
Having passive income streams equivalent to all of your basic expenses is the ultimate in unemployment insurance. No forms to fill out. No requirements that you be actively looking for work. And no living on cat food, because that’s all you can afford with the gracious government handouts you’re receiving. Your lifestyle stays exactly the same as you go about looking for a new job.
2. Freedom to Live and Work on Your Own Terms
As much as I like my job, it does necessitate certain sacrifices. There are meetings at hours that I would rather not be at meetings. There is the occasional evening and weekend work. There sudden business trips to far off places at times when I’d rather not be traveling. And there is always the possibility that I will be asked to pick up and relocate to a new area of the country or possibly even the world.
I try to either make the best of these situations or minimize them. But the reality is that I don’t have that much leeway to say “No.” The company says “Jump”, and I say “How high?”
If you’re financially independent, you can start calling the shots regarding how your work life is structured. You can push for hours closer to what you want, less overtime, or even shift to part-time work. Since you no longer need the job to pay for your expenses, you no longer need to jump through every hoop like some kind of a circus animal. If you’re a good worker, and your demands aren’t unreasonable, most companies will do what they can to keep you around. And if they don’t, then you can walk away anytime you feel like it.
3. License to Take Risks at Work
Have you ever wanted to speak up about something at work but were too afraid to because you didn’t want to risk rocking the boat? A lot of people can think of projects and procedures that should obviously be either pushed forward or killed off, but yet no one is willing to speak up and say so. Usually, out of fear of stepping on some middle manager’s toes.
Being financially independent imparts you with the courage to take those risks. Maybe you will step on some people’s toes. And maybe that will set you up for being downsized in the next round of layoffs. But those risks are now much more tolerable since you no longer need to be employed in order to pay for your expenses.
4. Extra Spending Money
Since I write so much about the importance of saving money, the thought of spending more might seem a bit out of place. But since you’ve got all your basic expenses covered though your passive income streams, you can devote some of your actively earned income towards the good things in life. Fine food, world travel, whatever floats your boat.
As your passive income streams increase, you can also increase your standard of living accordingly if you so desire, knowing that all those expenses are covered.
The extra spending doesn’t need to be on yourself either. You can channel your extra money to your church, charities, or your relatives as you see fit.
5. Freedom to Pursue Entrepreneurial Ventures
Have a great idea for a business? Have you always wanted to stop working for the man and start working for yourself? Entrepreneurship isn’t for everyone, but it’s a very powerful instinct for certain people. Unfortunately, that instinct is often crushed by the many risks that entrepreneurship carries. Chief among them is that your financial life is now entirely tied to the success of your new start-up. What if your new business has slow growth and isn’t nearly as successful as you need it to be to keep paying the bills?
A sizable emergency fund and a solid business plan will help a lot, but it’s a lot easier to make the leap to owning your own business if you know that your basic expenses are going to be covered regardless of whether your business succeeds or fails. That is the power of financial independence.
6. Retire Early or Even Very Early
Maybe the whole “work” thing isn’t for you. For some people out there, a day job, any day job, is just a bad idea. Maybe they’re free spirits, or have the misfortune of having never found a job that meshes well their personality, or are just lazy. I’m not here to judge (at least not in this post), but I here to tell you that if you hate your job, financial independence is your way out of a bad situation. Once your expenses are covered, and you’ve got enough overage to enjoy the kind of lifestyle that you want, there’s no more need to work if you don’t want to.
How early can you retire? That depends entirely on your savings rate and your desired lifestyle.
7. Spend More Time With Your Family
If you chose to channel your financial independence towards a career change to a job with better hours, a shift to part-time work, or retiring for the work force altogether, a great deal of free time will be made available. If you are so inclined, you could spend that time with your family. Maybe you would shift your focus towards raising your children or even home schooling them. Or perhaps you would want to shift your efforts towards elder care. By no longer having to work as much, you’ve now freed up a lot more time for family.
Readers: Why are you interested in financial independence? Have any of these reasons convinced you to start taking financial independence seriously?