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Finance

Stop Preaching for Financial Independence

A call to all supporters of financial independence: please stop preaching — you’ll endanger your own hope of financial independence, or even compromise your current state of financial independence. Why am I saying this? I strongly believe that financial independence will only be sustainable if a small portion of the population achieve it and actually rely on their passive income for their daily lives, while the majority of the population work very hard and spend a majority of their income while saving only a small portion of it so that they won’t be a burden to the society once they’ve passed their productive years. When somebody exercises their financial independence thus he/she is actually taking an early retirement — we’re already facing issues of aging populations in many developed nations, and early retirees will just add burden to the economy.

Why is this so? Firstly, financial independence is based on the idea of sustenance from investments. This may be investments of financial assets (returns from stocks, bonds, etc), physical assets (yield from leasing out apartments, houses, or land), or even intellectual property rights (royalty payments from music, books, or patents). Essentially the idea is to get your assets work for you while you’re doing practically nothing (or doing something that you really like that perhaps are of no value to anyone else). Well, guess what, your assets won’t work by itself without other people working for it. Stocks won’t go up by itself — the employees of the companies which issues the stocks will have to work to provide real value and then provide your dividends and drive the stock price up. Nobody will rent your apartment and pay you for it if they couldn’t make money by having real jobs that require them to live in your apartments. Similarly a large part of those who buy your music are not musicians themselves and will need to generate their money by doing other things — not to mention that music tends to get obsolete fairly quickly and sales will decline with it.

I have this small analogy to illustrate this. Suppose that you live in a small country that is essentially a large orange farm. The country creates value by selling a large part of the oranges to their own citizens and a small part overseas. For the sake of the example, let’s say that everybody eats oranges in that country and that it satisfies all of the people’s dietary needs and all other services (banking, medical, etc) are paid for by the salary from the orange farm workers. There are the workers of the orange farm and there are land owners of the orange farm — most of the revenue gained from the orange sales are kept by the land owners and a small portion are paid to the farm workers (similar to what happens in a lot of modern corporations). Suppose that some of the orange farm workers want to achieve financial independence and thus saves up a major part of his salary to be able to buy a patch of land to grow oranges so that they can enjoy the rest of their days relaxing while people works for him growing oranges. Now that these farm workers have become farm owners and thus inspires other farm workers to follow their paths. A few decades later, a lot of the farm workers have become farm owners and thus having difficulties in finding workers to work in their farm. Farm wages have gone up due to scarcity and sales is down since most of the citizens already grow their oranges and won’t buy from others. Selling overseas is not too profitable since shipping costs are high and a lot of the shipping workers have transitioned to become orange farm owners. Suddenly a lot of the farm owners realize that it is not profitable any more to own an orange farm and have lost their financial independence.

So again a call to all bloggers, supporters, and proponents of financial independence: please keep quiet for the sake of all of us. Respect those who are still caught in the rat race — they are actually working for you indirectly. Respect those who spend a large portion of the salary traveling around the world or buying expensive cars and dining in fancy restaurants. As long as they don’t use debt to spend it, it is okay. Even a relatively small portion of debt is fine as long as it is kept low and doesn’t become bad debt (which will adversely affect us investors). These people are working for us and each worker who got bitten by the financial independence bug means one less worker that can support our financially independent life.



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  • analis fundamental

    You must be not independent financially or do not have chance to be financially independent..I am sorry for you….

  • mickaelchia

    You are right, most people cannot be financially independent even in old age. Just like higher education — most people cannot be graduates (now only 1/3 in US in 25-34 age group). If most people are graduates, the value is diminished (though not lost) for income differentiation.

    However financial independence is a worthwhile goal. It is s CHOICE not a must. If you (and readers) really want to be financially independent, visit http://manitree.com/. I wish you luck.

  • walter

    Keep preaching…the more you preach the less peope will listen

  • mariacri

    I do not why worry, 1)the idea of financial independence is appealing but imply a big effort for the majority of people especially the one that are starting from scratch 2) still a lots of people are illiterate 3) third world countries need to work 4)There are still professionals devoted to their jobs 5) Consuming is very addictive 6)….

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