The ‘Why?’ Behind Your Financial Decisions Matters!
So, you would accomplish a great deal, have all sorts of cool stuff in your life, and travel to a bunch of awesome places, if only you were rich, wealthy, or financially independent, right? Great! But why aren’t you any of these quite yet? What has prevented you from fulfilling your wish up to this day, especially if you live in the US — a country full of opportunity and perfectly legal ways to build and grow wealth? Of course, the US isn’t the only place where you can become financially independent or wealthy, but still, it’s one of the most opportunity-rich locations on the globe for those willing to invest time into acquiring a reasonable level of financial literacy and cultivate excellent financial discipline. If you lack one or both of these prerequisites, well, that could surely be a serious impediment to your financial growth!
How strong of a determining factor is your motive to become a financially independent individual in the sense that the rich give to this term? You see, their definition of financial independence differs from the definition commonly used by the poor and middle class. Have you taken a moment (or two) to explore the true ‘why’ behind your aspirations towards financial independence?
If you’ve been conditioned early on to think like most people who lack good understanding of how money really works, then your idea of becoming financially independent revolves around earning income just so you don’t have to depend on your parents, spouse, or government for support. On the surface, it’s not a bad plan. This type of work can be done through an employer or through self-employment. Either way, though, it yields the highest taxed type of income you could come across, making it hard for most people who primarily rely on it to build wealth in a relatively short timeframe.
By contrast, rich people assign quite a different meaning to the term financial independence (or financial freedom). Per their definition or interpretation, you acquire or create assets that produce revenue even while you sleep and, when properly managed, continue making income and compound wealth for generations, meaning, well after your death. Such assets can be residential or commercial rental real estate or a product-based or service-based business that has a self-sustainable enough system built in so as not to require your daily presence to operate effectively, to give just two simple examples.
It's hardly an exaggeration to say that, for the experienced and sophisticated investor, there are countless ways to make monthly cashflow through investments spanning a wide range of complexity, depending on the investor’s financial literacy and sophistication level. One of the reasons the rich and ultra-rich like building multiple streams of income as opposed to relying on just one income stream, such as a job or a small business, is that they understand the risks in a rapidly changing economy well enough to avoid making the common mistake of focusing their money-strategizing efforts on a single source of revenue.
There are as many ‘whys’ when talking about building wealth as there are people aspiring towards financial independence. Here are some excellent reasons to pursue it:
Gives you more choices in life.
Increases your ability to spot and promptly take advantage of opportunities.
The very process of acquiring it expands creativity.
Enhances problem-solving ability.
Prompts you to accept challenges of increasing complexity.
Expands your understanding of and ability to predict people’s behaviors.
Sharpens your perceptiveness in connecting the dots between multiple related or seemingly unrelated issues faster, leading to better decision-making over time.
Helps build character.
Helps grow true confidence in your own abilities.
Improves your skill to function under pressure.
It even allows you to make a difference or create a legacy over a longer time period by taking care of social issues that bother you, things you wish to see changed, improved, or reformed one way or another.
You may have already noticed that not all benefits to acquiring financial independence are immediately obvious. This is because some of these become apparent with experience. How gradually or suddenly at times this process evolves depends entirely on the strength of your perseverance. The longer you endure through the stress that’s inseparable from all foreseeable and concealed risks in any worthwhile goal or dream you commit to bring to realization, and the better you get at dealing and coping with the consequences of your decisions, the more cognizant you will become of the process you’ve embarked on to make that resilient, independent you finally transpire!
The concept of financial freedom itself is subject to various interpretations, often dictated by pure context. It can be (and often has been) grossly misunderstood, particularly by people who profoundly hate the jobs or business enterprises they went into or established for all the wrong reasons, ending up direly wishing for a way out, sooner or later. While it’s fair to say that a nasty workplace environment could serve as a great motivator for pursuing financial independence, it is really important to understand that this cannot and should not be your main or only motive. The issue is that there are too many people who don’t just hate their current jobs but hate to work altogether. These same people prefer to believe that financial freedom means no work at all, which is a cutesy idea but rarely true for most financially free individuals you’ll meet out there.
The notion that doing what you love is the key to success doesn’t tell the whole story, either, and this is no news to anyone who has tried it, because anything we do involves challenges and unpleasant experiences if we are to do what we love doing right and consistently well. Many times, even the things we love doing most require going through action steps we’d prefer to skip every day of the week. Yet, the refusal to overlook these details is exactly what separates the mediocre or average majority from those few who succeed in making things work at least ninety percent of the time despite the average majority!
There is no better predictor of failure than the choice of a wrong motive for pursuing any goal, including financial independence. Poor personal choices of ‘why’ lead to poor results when hard work lies ahead, because “whatever it takes” is just not for everyone, unfortunately. If you want a clean start on your financial independence path, you need a clear motive and an organized set of goals. Do you:
Want a hedge against inflation?
Want to retire early? If so, how early?
Want to free time for travel?
Want to develop income steams unrelated to your job/business to help your children go through college?
Want to expand passive income options to enhance your retirement?
Want to start a new business?
Want additional income streams to build wealth and improve lifestyle choices while you continue working and being useful/helpful to others through your marketable skills or services?
Want multiple sources of revenue for the purpose of helping others?
The earlier you determine the ‘why’ in your financial independence pursuit, the sooner you will adapt your money-related decision-making to that motive. From a practicality standpoint, acquiring financial independence should be a holistic process as it affects every other aspect of your life — health decisions, career choices, spiritual well-being, and the quality of your relationships. Looking at wealth-building through the prism of a holistic approach to life might seem like even more work awaiting to be done compared to what was discussed at the beginning of this post. That’s good, because true financial independence does, indeed, involve a lot more work than you probably thought or hoped it did! But if you are familiar with my book or have read other posts in this blog, you are already well aware of my take on how the dots connect in this intricate thing called life and that becoming financially independent is a venture requiring no less responsibility than optimizing your health, picking a worthwhile field of work, prioritizing your relationships, or finding the emotional expression that best fits your spiritual needs!