There are many people that read this blog that are striving for financial independence. Financial Independence is more of a state of mind, than a financial thing. If you are in the USA, you may consider yourself financially independent as soon as you become an adult. Others wait until they are not working, are retired and on Social Security. Lots of people just want to be able to quit the rat race, and enjoy life. Still others are longing to achieve one of the main things that many people cannot, freedom.
Having a budget and activity goal is important if you want to be financially independent. Some people look forward to the days of getting enough passive income to make $40,000 per year. Some think they only need $30,000. Some need $100,000. And Donald Trump could not begin live on a lot more than those measly figures. Without a solid financial goal and budget in mind, you cannot be financially independent.
Financial Independence Definition
No longer having to get up in the morning and punch a clock is one definition of FI. Here in the USA, no one has to work. There are plenty of food shelves to get food, plenty of soup kitchens, plenty of ways to get enough to eat without working. No one in America is starving to death. There may be some children who are not being taken care of properly, but adults have many choices if they seek out help. Having enough food on the table is not the definition of being financially independent.
Having a roof over your head is relative. If you are in Florida, Hawaii or any other warm state, you can sleep outside. There are shelters. There is public housing. There are bus stops you can sleep in, and there are programs that give you money for rent. If your definition is having a place to stay, you are already there. Having a place to lay your head at night is not the definition of being financially independent.
Having access to healthcare is important to some, and would be part of being financially independent. Once again, the USA has free healthcare for people that do not care to work. You can go to any emergency room, and the hospital has to treat you. Medicaid is there for low income people. Even the Affordable Care Act (ACA) provides subsidies for people who cannot pay for healthcare. Some states have additional programs to help you if you need healthcare.
So, even if you are not working, you have access to food, shelter, and healthcare. You can get arrested and go to jail and have “Three hots and a cot”. And healthcare. People can have this all without working a day in their lives. Not many people would qualify this as their definition of Financial Independence. So, Financial Independence is a lot more than just surviving. It’s a lot more than just making $3,000 to $4,000 per month. You can get that much in services just by being dependent on the State. Here is an example.
What are these benefits worth, in Minnesota, per month?
Section 8 3 BR Voucher (includes utilities) $1,270
Free Healthcare $500
Food Allowance $650
Free Legal $15
Free Bus fare $100
A minimum of $30,420. After tax. It would be worth a minimum of $32,747 if all you paid was the Social Security tax on the money. Some people work their entire lives and work until they are old and decrepit and barely achieve that level of income in retirement. If you are willing to give up choices, you can jump off the rat race and let the State provide for you to a comfortable level.
The one thing you will not have when someone else is providing for you is choice. The freedom of choice is what sets apart the people that “have enough”, and people that are financially independent.
Freedom of Choice
If you have money, you have choices. You can eat at McDonalds, or at the Taj Mahal (do they even serve food there?). If you have a food voucher, you eat at the place the voucher is issued for. There is no choice. You may not even get a choice of what you eat. And it may not taste good. You may have the option of several grocery stores, but not every item on the shelf is eligible for purchase.
If you want to go on vacation, to Florida, Hawaii, or anywhere in between, you need cash, not an Electronic Benefit Transfer (EBT) card. You cannot buy an airplane ticket with an EBT card. You cannot get the latest DVD from Amazon with the EBT card. And you definitely cannot buy a beer with the EBT card (at least not legally). So, you slog off to work to give yourself money, so that you will have more choices.
If you have a Section 8 voucher, a jail cell, a bed at a shelter, or a home in a public housing development, you have your housing needs met. Most people do not want this type of lifestyle. They want to earn enough to give them choices. If you are truly FI, you may well decide to sleep on the beach in Maui, but it will be because of the adventure, not because you have to.
So, the freedom to have the choice of where you eat, where you live, and where you get your healthcare is a prime consideration of being financially independent. It is not all about the money, or the freedom from going to and from a job.
What is your definition of financially independent?