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My Financial Independence Journey » Reflections » 7 Reasons Everyone Should Reach Financial Independence

7 Reasons Everyone Should Reach Financial Independence

1218723_fireworksWhy 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?

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29 Responses to "7 Reasons Everyone Should Reach Financial Independence"

  1. Mike says:

    Awesome article and I agree. I am pursuing it for 1,2, and 3. We do not know what the economy will be like in 20 years. I do not know if my field will be eliminated so this is the only true way of preparing for it.

    am not a nit picking anal hipster
    but you spelled (spelt?) independence wrong

    1. MFIJ says:

      Those are probably the main reasons that I’m pursuing FI. I’m really attracted to the idea of having my own unemployment insurance. And after I do hit FI, I may try to relocate. I love my job, but the thought of spending the next 30 years of my life in this area makes me sad.

      Also, good catch on the spelling error.

  2. Michelle says:

    Great post! I definitely want financial independence. I want to be able to do what I want to do, and when I want to.

    1. MFIJ says:

      For me the biggest attraction is the insurance aspect of Financial Independence.

  3. Scoonie says:

    Yes, great article. #1, #2< #6 and #7 are the most important factors for me. Even if you plan to work until normal retirement age, the extra income you can achieve from dividend investing will lower your stress level and help you sleep better at night.

    I don't ever want to be desperate for money if I lose my job. I never want to worry about money, period.

    1. MFIJ says:

      It’s unlikely that I’ll exit the workforce as soon as I hit financial independence. The lifestyle afforded by a low level of FI is okay, but it’s not stellar. But with additional income at my disposal, I’ll be increasingly able to pay for whatever I want. What’s really exciting is the thought that if I retire at the normal time, I’ll have so much income coming in from my dividends that it will probably meet or exceed my regular salary. I could drop my savings rate down to 10-20% of my dividends, buy everything I want and still build my portfolio. That’s a hell of a lot better retirement than most people are going to have.

  4. Number 2 was my main priority. Being able to work when and if I wanted. Yes that can be considered lazy although why work more when you can have whatever you need with the money you make? I may work more if I really want something but a bigger house, fancy stuff to fill it, etc. Are not on the list.

    1. MFIJ says:

      I kind of like the standard 9-5 job (assuming the people and work culture are nice). The structure appeals to me more than trying to be a freelancer.

  5. 1 & 2 are my main reasons for having financial independence as a goal. The lack of stress and ability to do what I want when I want is the major appeal to me.

    1. MFIJ says:

      1 and 2 are the big ones for me as well.

  6. 1,2,6 and 7 definitely apply to me.

    Great list! I think everyone should have flexibility, even if they so choose to never take advantage of it. It can never hurt to have extra money in the bank for whatever life throws at you. The camp that lashes out at people trying to reach FI/early retirement may do so out of a lack of security. Financial security is so important to me. I simply cannot understand how anyone could not want that.

    Best wishes!

    1. MFIJ says:

      If people lash out against those who try to reach FI/ER, it’s probably because of the lifestyle and sacrifices required to do it. Having a 50% savings rate makes me a lot different than my peer group. I’ve got a one bedroom apartment, my peers have half million dollar houses. I’ve got a 17 year old car, my friends drive recent model Lexuses. The list goes on. Maybe those examples seem extravagant, but when I was a postdoc saving 25% of my income it was the same thing, just replace half million dollar homes with 2 bedroom apartments or small houses, and replace the Lexus with a Corolla.

      And one thing that I’ve always openly admitted is that the sacrifices aren’t fun and that I do miss out on things in pursuit of FI.

  7. This list are the exact reasons I’d like to become FI as soon as possible! It just gives you so much more freedom and ability to do what you want when you want. I’m not sure I’ll ever save 50% of my income, but I have no problem saving 30% with that end goal in mind.

    1. MFIJ says:

      I’m only able to save so much because I make a lot. When I was a post-doc I was only able to save around 25%. The most important thins is that you lay out a plan, set aggressive goals that work with your situation, and make regular progress towards those goals. That alone will put you ahead of almost everyone else.

  8. [...] 3. 7 Reasons Everyone Should Reach Financial Independence @ My FI Journey. [...]

  9. Great Post, very good reasons for being financially free. When you have financial peace you will be at ease!-(Don’t steal that I might use it on my blog) I will add 1 more reason because this is my comment and it is very close to my beliefs / values. If I ever reach FI I will volunteer more. ( I just love to give back)

    1. MFIJ says:

      The nice thing about FI is that once you reach it, you have a lot more control over how you spend your time. If you want to volunteer more, you can do it, since you won’t have to spend as many hours at your day job as someone who hasn’t reached FI.

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  11. The biggest advantage I can see is that I can work only when I want and on what I want to do and not because I have to. (your point #2). And your #3 point is good too, you get a great leverage to negotiate better terms with your employer.

    1. MFIJ says:

      If you work for someone else, there will always be tasks that you don’t like. But FI will give you the confidence to push back against some of them.

  12. [...] 7 Reasons Everyone Should Reach Financial Independence at My Financial Independence Journey [...]

  13. Those are all good reasons. I think #2 and #7 are my main motivations. I may work until I’m old and gray, but it will be on my own terms and not to pay bills.

    1. MFIJ says:

      For me it’s mostly reasons 1 and 2. Although if I had enough money I’d probably walk away from working all together.

  14. Financial independence is a dream of mine. As an actor, I face unemployment with considerable frequency. For instance, I’m working on a contract right now, but as of August 10th it’s back to auditioning and not knowing where the next paycheck is coming from. I hate the idea of having to wait tables in the meantime, which is why I save well over 50% of every paycheck while I’m performing.

    1. MFIJ says:

      I can’t imagine that being an actor is easy financially, unless you’re one of the small minority that makes it to celebrity status. Saving 50% of every paycheck while performing seems to be a necessity in your case. Do you make enough money where you could divert any of it towards income producing assets?

  15. I think we are born to be champions. Money is not a hindrance for our happiness. If they can reach financial freedom, thus we can also attain it. We are not machines to be slaves for the money. The money should work for us thru business or portfolio that earns interest. Life is meant to be beautiful if we will sail our path to financial freedom.

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  18. […] week, there was a well-circulated article in the My Financial Independence Journey blog entitled 7 Reasons Everyone Should Reach Financial Independence. (See, I’m by no means the only one out there beating the drum for financial independence instead […]

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