I used to always think that financial freedom (or financial independence) meant being rich. Like billionaire rich.
It was probably Robert Kiyosaki’s fault for my confusion – his book on financial freedom was even titled Rich Dad Poor Dad. By implication, if you weren’t rich, you were poor. And in order to be rich, you needed to swing for the fences, have a super business and lots of property and then buy lots of stuff to show wealth. You either spent all your money on consumerism and were poor, or you spent all your money on investments and consumed but at a higher level.
Anyway, that isn’t what financial freedom is about actually. I no longer have the starry eyes of youth where everyone aims to be rich, but now am rather more mellowed and cynical and instead have the understanding you just need to be comfortable, not rich to achieve freedom from financials.
What do I mean by freedom, well let me use two instances that stuck out to me in the past.
Firstly, we recently watched Annie the musical – back during the days when real actors were on stage and spat on you and each other as they regurgitated their lines with great gusto. Pre-Covid nostalgia aside, and the fact it was just a show, what really struck me is how much of life’s occurrences are completely out of one’s control.
I believe in capitalism, I believe in carving your own path and pulling yourself up by your bootstraps and all that. But in the play, based on real situations, was that all those folks, despite being highly skilled workers, were still made destitute by the Great Depression. It would seem this shouldn’t happen, that if you try hard enough, you’ll be able to use your skills/re-skill and then just get another job and rebuild. However, even with the best of intentions the family cannot get back to normality.
It seems in situations like that, there is very little that can be done. I remember thinking at the time of the show, it would surely be simpler in the present day as nowadays it would be easier to move to another country and get work there – just shift to where there is demand – but that a global crisis like the Great Depression would limit even this possibility. Guess what, here we are in a global crisis after all, and few are able to move to other opportunities. In fact, I’m not sure yet where one would even need to go.
As per the time I watched the show and now, it just feels like it’s a wake-up call for everyone to do more of what they want, live your life now as things are not in your control and not to work to the exclusion of all else. I’m not talking about consumerism, or blowing all your money, but I am saying build in financial freedom from work. You just don’t know when the ability to work will be taken away from you. You need to have the financial freedom that you can get past no work, it doesn’t push you into poverty, since it isn’t always easy to just get back on your feet again.
The second example. I’ve bumped into many colleagues that say you cannot have time to spend time with their kids due to work commitments. I’m not talking about having dinner with the kids or dropping them off at school. Even the busiest CEO should be able to see their kids occasionally, or at least give the au pair a phone call to check up.
No, I digress, I’m talking more about once off experiences. My colleagues would complain they didn’t have time for such stupid things. Things like making costumes, or attending your children’s plays, or playing in the garden with them, or helping them with homework. These things are not possible when working. You – well they – need to work. And you need to work hard – like 60 to 80 or more hours a week. Otherwise you cannot afford to send your kids to private schools, or their after mural activities like robotics, horse riding, their car maintenance or the tutors and au pairs that help your children with homework and raise them. Therefore you have no alternative to working.
That is all true, in a circular reference kind of way (yes, I go to Excel for all my best quotes). It’s true, because your costs result in the workload. Your work removes all your time, and no time results in these costs. As such you need to hire help to create the time for your children that your work removed.
Would working less result in more time for your kids? If you helped your kids, would you require the au pairs, the activities to keep them occupied, the take out meals, the private school? For me, it did. For my colleagues the suggestion was ludicrous. Even though, they all grew up the same way I did, without any of that stuff.
Ultimately, is all that work worth it if you never see your kids?
I wonder, do people assume they need to work in order to have nice things – there is a mismatch between wants and needs and this causes us to believe you have to work more. It just seems that children get a better upbringing with parents that are present. I want to be able to spend time with my kids rather than just being the ATM. If that requires less consumerism, so be it. Better than financial slavery tied to a desk.
So in short, use your work habits and income to build in the financial freedom. Don’t just blow it all on bad habits like lifestyle inflation – which ties you to a desk, removes time, and is just a modern form of slavery – and rather build in the financial freedom to not work. Then, when the next financial crisis arrives (or this one carries on for long enough) you at least aren’t wiped out. After all, no one knows how much time you have left. Use your most important asset wisely.
