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Imagine for a moment that you never have to rely on a paycheck again. You can plan your day out however you like, pursue any passion project you have dreamed of. You’ll have plenty of time for family and friends, and the financial stability and wealth to take care of your family. Sounds good, right?
This is financial independence, otherwise known as FI. As amazing a concept as it sounds, it still seems like an unrealistic fantasy.
But it actually isn’t. Not only is financial independence possible, but there are so many reasons why you should aim for it. These reasons become your why, the driving motivation that will get you there.
Action Step: See 5 Simple Steps to Financial Independence to learn how to achieve FI.
For me, my why comes from the need to take control of my day and my time. There are so many things I want to do with my life and time I want to spend with my loved ones. As a full time single mom I just can’t stand the thought of missing all of my son’s childhood years because I’m busy working all day.
I am tired of being tied to my work schedule and my paycheck.
But there are even more reasons to consider breaking the paycheck cycle by achieving FI.
In this post I’ll review the top 7 reasons why you should pursue financial independence.
Generational wealth
Take a moment to think about how hard it is right now to save money and build wealth for a comfortable and secure future. How many years of money mistakes did it take to realize that saving for FI and early retirement would be life changing? It took me 10 years.
Do you want your kids to struggle the same way?
As you move along on your journey to FI, your money will start working hard for you. Investments will become self-sustaining, money-making machines, earning you even more money. The beauty is that they will continue working, whether you are around or not.
This is what you can pass down to your family. The education that you learned along the way to save money and successfully invest, as well as the actual investments.
This is like giving the gift of life. All over again.
Your family will be secure for generations (so long as you also teach the wisdom to manage money), leaving them free to live the life they want. If travel or volunteering in a remote country was their passion, they could do this. If earning a PhD in Roman History and teaching high school history for barely a working wage was their passion, they could do this, too! Without fear of financial hardship.
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More time with family
I don’t think there are many parents out there that dream of having kids only to leave them in the hands of someone else to raise them. But this is what we are all too often forced to do.
In my city, the cost of living is so high that it is completely normal to join a daycare waitlist shortly after becoming pregnant. As soon as the baby is born and paid maternity leave is over, it’s time to go back to the daily work grind. This forces parents to miss so many of their child’s firsts and key milestones.
Financial independence breaks this cycle. While it is really hard work to get there and the journey involves diligent effort to earn and save money, that hard work includes a purpose and an end goal in sight. You can choose how aggressive you want to be in your pursuit to FI.
That end goal includes the freedom to be home with your kids and fully involved in raising them to be the little individuals you dream they can become.
More time to explore your passions and engage in meaningful activities
The daily grind has a way of slowly stepping on your dreams until they are flat and forgotten. Do you remember what you dreamed of doing when you were younger? Do you remember what you imagined your life would be like?
Financial independence frees up your time so that you can once again dream of what you want to do with your day. Not what you have to do. Freedom from your paycheck doesn’t mean you don’t have to work anymore. But you do get to work on whatever you want. Whether it makes money for you or not.
Financial education learned along the way is priceless
I’ve heard someone in the FI community say that his worst case scenario is having to find a job and go back to work.
In other words, his worst case scenario is our everyday reality.
Even if something happens, like a market crash or a natural disaster that takes out a rental property, once you reach FI, you have the skill set to weather any financial situation.
If you had to start over again from scratch, you would have the financial education and money management skills to bounce back faster and stronger.
That’s priceless.
Peace of mind that you (and your family) are prepared for any event or market
There are two examples of how financial independence provides peace of mind for the future.
First, saving money and building up assets results in an ever improving net worth. This means that you have the savings to cover unexpected expenses that come your way. Even if a large expense or loss of an asset were to set you back a few years, it won’t set you back into debt or bankruptcy.
Secondly, with financial education comes the ability to correct and change investment strategies when necessary.
Whether the stock or real estate market is crashing or going gangbusters and unaffordable, you will have peace of mind that you can withstand any financial storm, simply by adjusting or diversifying your investments.
Opportunity
Good luck can be enticed by embracing opportunity.
–The Richest Man in Babylon by George S. Clason
Opportunity is a haughty goddess who wastes no time with those who are unprepared.
– The Richest Man in Babylon by George S. Clason
Opportunity cost is so often overlooked. You probably know it by another name: Luck.
But is there really such a thing as luck? Are some people more fortunate and lucky than others?
The reality is that somewhere along the path to FI, opportunities become easier to spot. More importantly, once you have a strong financial foundation, you can can actually act upon those opportunities.
Here’s an example:
Joe is a regular working guy. However, he’s saving aggressively with plans to reach financial independence within the next 5 years. In addition to saving for retirement, he has $50,000 set aside for investing. He’s not quite sure what to invest in yet, but he’s been researching some possibilities.
During his regular evening run through the neighborhood, he passes a small apartment building. It looks a little run down for the area and has a for-sale sign up. He notices an older gentleman raking leaves out front. Joe stops to say hello and asks the gentleman if he knows anything about the property.
The older man stops his raking and begins his tale of woe. He is the owner and his wife recently passed away He wants to move back to Texas to be closer to his family. However, he can’t afford to fix the building up and it just isn’t selling in the state it’s currently in. He just doesn’t know what to do. He needs the sale to afford the move back home.
Joe requests some additional information and 20 minutes later agrees to purchase the building for below asking price. He agrees to a downpayment of $40,000 and seller financing for the remaining purchase price of $400,000. This will allow the older gentleman the money he needs now, as well as monthly payments without the hassle of managing the rental units.
Everyone is happy and Joe is the proud new owner of a rental property which brings in $900 of passive income every month. Over the next few months Joe updates the units and increases the rent to market value. He is now bringing in $1,500 every month. This also increases the overall value of the property.
Two years later, another investor approaches Joe and offers him $800,000 for the apartment building. Joe sells it and uses the earnings to purchase another property for $1.2 million. He doesn’t have to pay taxes on the money he earned in the sale of his apartment and now he owns a larger apartment which brings in $4,000 of passive income every month.
So was Joe lucky? No, he was simply prepared to embrace opportunity when it became available.
Opportunity cost is the inability to recognize or embrace opportunity. The journey to financial independence prevents this from happening. Instead, you get to make your own luck by finding the right opportunities.
Teach your kids to manage money
Another benefit to planning for financial independence is that you can’t help but to pass along your knowledge and experience to your children. And this is a priceless gift that will help them for the rest of their lives.
Personally, the last thing I’d want to do is build wealth only to have my child mismanage it due to ignorance and irresponsibility. There is a reason lottery winners come into huge sums of money only to squander it and end up right where they started in a short period of time.
It is so important to model how you treat money. Pass down the wisdom of financial responsibility so they can enjoy financial freedom for what it is. The freedom to live a rich and fulfilling life pursuing their passions rather than a paycheck.
Recap
The journey to financial independence requires passion and drive to stay the course. This is created when you have a very strong reason why it is essential that you achieve your goal. Luckily, there is no shortage of reasons to pursue FI. The 7 reasons presented in this post can help you along in your journey or decision to save and invest for FI, and motivate you to keep making progress. Each one is a component to the end dream, a life of your choosing.
Do you have additional reasons why it is important to you to pursue FI? Share what drives you in the comment section below!
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