Everyone should be working towards financial independence.
I mean everyone. Even the ones that absolutely love what they do and don’t ever plan to retire. Why? Because you may not have a choice.
Let me back up for a sec. What does financial independence really mean? It means having enough passive income to live off of that you never have to work another day if you choose not to. Sounds pretty sweet right? But how do you do it? There are many ways. You can invest your way there and save 25 times your annual expenses. You can have a portfolio of real estate properties that generate enough income that covers all your expenses. You can have a business that operates without you and generates enough revenue year after year so that you don’t have to work. Any of these or a combination of these will work.
So now that we’ve touched on how, let’s go back to why.
Because if you can’t see the why of financial independence then there’s no point in teaching you the how. The why is two-fold. One is a stick and one is a carrot. Let’s start with the carrot and my favorite “why.” Financial independence gives you freedom. It gives you options. It allows you to hit the “eject button” on any situation and move on with your life.
Maybe you always loved your job but now you have a new boss that’s driving you crazy. You know what they say: “people quit bosses, not companies.” Maybe you want to take a sabbatical and spend some time with your kids before they’re grown and out of the house. Maybe you want to finally take a job that you love even if it pays less.
Financial independence makes these choices possible. Financial dependence on one employer or paycheck keeps you stuck.
Now the stick. Financial independence is a safety net for a phenomena that is unfortunately picking up steam: age discrimination. As an employment attorney I can attest that age discrimination is very real. Is it illegal? Hell yeah. Do companies break laws all the time? You betcha. Is it hard to prove and leads to employees being blacklisted and retaliated against when they complain? It sure does.
Older workers are getting pushed out of the workplace in larger numbers.
“Nearly 2 million older workers have left the labor force for good since the start of the pandemic. That means the number of older workers still employed is down by about 5 percent, compared to less than 2 percent for workers ages 35 to 54.” (Source: AARP, In One Year Pandemic Forced Millions of Workers to Retire Early). This is even more drastic when you look at the Hispanic and Black populations.
So even if you want to stay at your dream job until 60 or 65, you may not have that option. The decision may be made for you and to willfully ignore this possibility is a huge risk. If you think investing is risky, imagine planning your entire future on one income stream from one company. That’s a risk.
The other stick is the wealth gap which is more of a canyon these days.
For every dollar a white man owns in wealth, women own $0.32 cents and women of color own a penny. A penny! This is due to many variables including the gender wage gap, but it’s also because of the investing gap. If more people invested, they would at least have a chance at building enough wealth to provide a comfortable life for themselves and their families. Without investing, people are limited to whatever they can earn by trading time for money.
And that’s why everyone should be thinking and planning for financial independence whether you want to retire early or not. And you can’t reach financial independence through saving alone. A savings account won’t even make you enough money to cover inflation.
You need to invest the money you make so that it can grow for you.
The stock market can work harder and longer than you ever could. It doesn’t take sick days, or get discriminated against, or goes out of business. Betting against the stock market long term is betting against the American economy- one of the strongest economies on the planet.
Investing doesn’t have to be complicated. If you’re reading this, you’re clearly interested in learning more about it and that’s a great start. Start by downloading my free Slay Your Money Guide and sign up for my free investing class: Invest for Independence.