We discuss the financial freedom of our students in Money School. This topic is often mentioned on our blogs and also in our teaching for children.
What exactly does it mean and why do you need to be concerned?
What is financial independence?
Financial independence is being able to provide for your needs without having to work.
In terms of money it’s not necessary to earn any income to pay the expenses. There’s enough money (rent or dividends, interest, etc.) that comes from your assets (cash bonds, shares properties, cash, etc.) which you can use to take care of, dress and house yourself with the same style to which you’ve become used to.
These are definitions that are technical and are often unclear. This is what financial independence signifies (in my own experience):
Never having to worry about bills that are unexpected,
Being able to not return to work until you’re ready
The excitement of a redundancy rather than worrying for your property
It is important to be selective about the time it is and how you are working, the job you play and with whom you collaborate with and work for.
Being able to give your time to causes you believe in,
Being aware that you’ll be cared with financial support when you die,
There is no need to worry about a slow month , either a quarter, year for your business,
Consider your superannuation to be a cream, not a necessary source of survival.
Be smug about changes made by the government to superannuation rules , allowances and pensions, because they’re not likely to affect you,
You’re sleeping well at night because you don’t have to worry about your finances, and
Being able to take risky decisions – such as taking a break from your job, moving to another country, or launching a new venture and not compromising the quality of your life.
Most importantly financial independence means that you have greater choices and options are at your disposal.
Why do I need to be concerned?
A lot of people say that they don’t really care about their financial security. They say they’re content working or that money isn’t a factor for them, or they earn a huge cash flow from their businesses and don’t have to be concerned about their assets, or aren’t well-organized with money and it won’t ever happen.
If you are a part of one of these, the section is specifically for you:
The first reason to be concerned is Why you should care: Shits happen
Epiphanies can come in the most unwelcome form sometimes. Divorce, death, and the reDundancy (often known as”the Four D’s,” hence my unique capitalization) are often the financial wake-up calls you don’t need.
The trend of layoffs and redundancies is likely to keep on. Industrial 4.0 is expected to erase 40% of jobs within the next 10 years – beginning now. Your partner might die or be a part of an alternative. You might get cancer.
We rarely see warning signs that indicate these kinds of events, or if there’s any warning signs at all. We’re all convinced that we’re invincible and that we’ll figure out.
Come visit the Fire The Boss financial independence retire early blog for similar articles.
There’s no way to accumulate more cash in the event that these events actually occur. They’ll come and you must deal with them. Now, right here with the things you’ve got.
This is the reason why a lot of people get into the position of being in. The Four D’s rolled around and they weren’t prepared. They are forced to destroy their immediate and long-term financial plans to finish their “D” without losing their homes.
There are those who believe that the it is still a mess years from now.
I’m not immune. There is no way to be immune. Your family members are not immune.
If the proverbial hammer hit the blade of the rotating Financial independence means that you won’t need to worry about sustaining your daily expenses while you manage it. It allows you to breathe. Also, it gives you sources of income instead of borrowing if the amount is over your income thresholds.
The second reason to be concerned is Reason #2 to care: The future of the workplace is in doubt.
There might be a time in the next decade that you’re handed an opportunity to receive the DCM (Don’t Come Monday).
We often imagine this being the case for factory workers who dress in muddy overalls during times of depression.
Don’t be surprised white collar workers, as well as professionals: layoffs are on the way for you. If you perform work that can be repeated – even in your computer or in your head Your days are over.
Here are a few examples of current trends:
Bankers are getting cut off all over the world by the thousands. Now. Thank you blockchain.
Machines that detect and provide advice with more precision than highly trained human beings are gradually replacing doctors and lawyers. Thank AI for your help, AI. (AI).
What’s the future for architects, when they’ll be in a position to print and build your house with no professional? Thanks, 3D printers.
Even the professions that do not have a significant reduction in headcount are likely to be transformed by the new working environment. I’m hoping Rutger Bregman’s prediction is correct and we will get the universal basic income as well as the 15-hour work weeks that he proposes in Utopia for Realists.
You might love what you do but that doesn’t mean you are immune from having to leave your work. Financial independence doesn’t mean that you must stop working, but it does mean that the income you earn from your job isn’t vital to support your lifestyle.
3. Reasons to care The reason #3 to care is that governments
Imagine that you’re aged 65. You’ve got very little pension and don’t even have an apartment. You’re not able to work because you are unable to locate anyone who will hire you, or you’re no longer able to perform what you were able to do or aren’t in the capability to learn.
The government will provide you, at a minimum, 445 dollars per week. In addition, you’ll have to feed, wash and shelter yourself. You’ll need to be proficient at making that $445 stretch since that’s all you’ll need in the next 15-30 years.
The extent to which you’ve made an important contribution to society doesn’t matter. The fact that you’ve had happy, healthy, well-adjusted children isn’t worth a dime. Your time and effort you’ve spent for the local groups and charities your donations are not considered. You’ll be able to get the same pension benefits as an all-time dole bludger, in the event that you’ve had identical balance sheets by age 65.
There aren’t any medals to be awarded that honor financial hardship. There isn’t a charitable group that is waiting to shower a modest sum of money to thank you for your work.
It’s this shocking shock that hit people nearing retirement. They are forced to spend their final working years trying to figure out how to soften the shock which can mean huge lifestyle changes at a time which is the time to enjoy your life.
The kicker is that pensions aren’t increasing. Australia is ranked 33 among 34 OECD countries in terms of our pension and the modern government shows no desire to correct this. Superannuation was introduced so that pensions would not be able to go. Your elected officials won’t increase the amount of pensions in the near future. Actually, people in my generation (I’m in the X/Y boundary) most likely won’t be able to access any pensions at all. The whole thing will be self-funded via superannuation.
If you’ve been able to relax your mind, do not forget that the government has the power to set the superannuation rules – which defines retirement age (it was recently raised between 65 and 67) and the tax rates that apply to funds coming in and out. The rules do not get more favorable.
Do you want to leave the power to influence your lifestyle for up to 25 percent of its time to the government? This is what you’re doing in case you’ve got a future retirement date in your mind.
Fourth reason to care Females are more likely to care.
Ladies Your female genitals are costing you. Big time.
There is the gender pay gap, which grows as you advance up the ranks. In addition you lose your income when you have children.
We’re not surprised that there’s the hefty 40% gender-based retirement gap.
We’re seeing more many Marys (from Jane Gilmore’s book ‘The cost of womanhood’ an eye-opening read). This is one reason women over the age of 55 constitute the fastest growing demographic seeking help for homelessness.
Women are pushed with the ball in a huge way. Unfortunately, the power structures that created this issue aren’t change quickly or in a decisive way. While we (society generally) are prone to discussing the issue in depth and hold expensive breakfast gatherings to discuss the issue but we’re a bit sluggish in taking action to address it. For instance why isn’t an annual gender pay gap study and correction required for every medium-sized to large business? If Australia Post can do it surely other companies could too.
In the workplace of previous times, employees were required to be more skilled than the top man in the same position to be allowed to perform a specific job. (It’d seem nice think these days are gone but I’m not sure we’ve reached that point yet.) Similar to that, we’re now more efficient in our spending as compared to our counterparts in the male market. We’re expected to make less spend more. We must make this a matter of ourselves.
The good thing is that it’s not as it is in the workplace. The money doesn’t care about whether you’re male or aren’t. It’s not possible to receive less of a dividend simply because you’re female. There’s ample evidence to suggest that women make great investors, and there’s absolutely no reason not to reduce your personal earnings and retirement gap with just a little persistence and practice.
The 5th reason to be concerned it makes life more amazing
In all the depressing, sad, and scary things I’ve covered but there’s an even more powerful motive that could outweigh the rest:
Financial independence can make lifestyle more pleasurable.
The freedom of not being dependent on the job you do is unimaginable.
You may choose to
…quit this horrible job whenever you’d like to.
…make the sea-change or tree-change real now, not after you’re old and gray.
…spend longer time spending with children when they’re still young.
…launch your business without the being afraid of having to leave your property.
…whatever you’d like!
This is the reason.
Financial independence. AWESOME.