It's a fairly common goal and ambition for many people to become "financially independent."
But what do we really mean when we say we want to be financially independent?
From my own personal perspective, I know that I'm definitely tired of life feeling like it's an eternal struggle… no matter where we turn, or what we're doing it always feels like the next setback around the next corner is going to result in a major financial disaster.
I don't say that to elicit some kind of pity or sympathy, but it's a pretty common scenario here in the United States of 2023. I've seen statistics suggesting that as many as 70% of US households are actually struggling to make ends meet in one way or another. That may not take into account that some of those are simply overspending and can't afford to fund their own poor money management but it's still an alarming statistic, at least from where I'm sitting. After all, we've long been told that the US is "the wealthiest nation on the planet" and yet over half the population is struggling to get by.
Like many, I'd also like to be financially independent and that's why I'm exploring this particular topic at the moment.
As I contemplate this particular topic the first thing that comes to mind is the fact that financially independent is not synonymous with being rich, a mix-up I think a lot of people make. When I think of financial independence what I'm really thinking of is being able to pay all the regular bills and the daily costs of running life without having to constantly worry where the money is going to come from. It also means that if something happens and I either can't work or an opportunity to do something comes along I don't have to turn those things away with the statement "sorry, I can't afford to do that."
Again, it isn't about luxury vacations or being able to buy a new Mercedes every year. Far from it.
But it all does beg the question: what is it I really want to be independent of, or independent from?
It would be tempting to say that I simply want to be independent of having to work but I don't have any particular desire to just sit idle; it's the phrase "having to" that's the key operator here. So financial independence, to me, means that I choose to work because I want to rather than because I'm forced to as a means of avoiding impending financial disaster.
So what else is involved here?
Well, as I contemplate that a bit further we get on the road towards what holds true for many of the truly wealthy individuals of this world: your income or source of funds is more likely to come from investments in the form of passive income, as opposed to active work.
When my parents grew old and were well into their retirement years their desire was always to be able to live off the investment income on their assets. Unfortunately their old age coincided with a period in the world's financial history where investment yields — and specifically fixed income yields — moved towards extremely low levels so they lived out their lives not only drawing on their investment income, but also having to draw down the actual principal they had managed to save in the course of their lives.
Fortunately for them, even though they managed to live into their late 80s (my mother) and early 90s (my stepdad), there was enough that they didn't just run out of money, at the end.
Alas, their situation was very different from our own because they lived in an era when far more people had incomes that were substantially higher than their cost of living.
But let's get back to financial independence and what that means.
Aside from that, I've never really held any great degree of ambition.
And yet... even this relatively modest degree of financial independence has been quite elusive. Thankfully, I remain hopeful that life will turn out OK all the same. Mrs. Denmarkguy and I have maybe 7 or 8 years of active working life left after which we are planning to sell the fairly large house in which we currently live and move to much smaller less expensive quarters, while using probably half (or more) of the proceeds from selling our current house to hopefully generate at least some investment income so that we can continue working, but at a much more modest level and hopefully still afford our bills.
But that's just my definition of financial independence. And I'm also keeping in mind here that I'm in my early 60s, where people who are in their 20s and 30s would have completely different definitions and needs. Financial independence is definitely something we have to define for ourselves, and I think that's an important point here. It's not something we can read our way to in a book or a blog or an article, it's something we have to sit down and actually define for ourselves.
So what does financial independence mean to you?
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Created at 2023-04-22 00:31 PST
0807/2062
