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You have probably heard a lot about Financial Independence. A lot of things on this blog are about my path to Financial Independence (FI). But why would you want to be financially independent? There are many reasons for wanting to reach financial independence. And as you will see, retiring may not be the most significant reason.
In this article, I list the main reasons people want to be Financially Independent. Of course, the reasons may not be the same for everybody, and some will appeal to you more than others. It is fine. Not everybody has the same motivations in trying to reach FI. And not even everybody wants to reach FI!
You may have some reasons to reach financial independence that I did not even think about! Please let me know in the comments if that is the case! I would like to know why you want to be Financially Independent.
Once you reach financial independence, you are safe from several events that would cause a significant income loss.
For instance, if you get fired, if your company goes bankrupt, or you are unable to work anymore, you should not have issues sustaining your lifestyle. All these events are not a big deal for your finances once you reach financial independence. They may still be a big deal for you, of course. But if you are financially independent, you are ready to withstand them without issues.
It is also a security of retirement. Currently, in Switzerland, retirement is not too bad. But who knows how that will be in 30 years. There may not be any pension or help for retired people. If you are already financially independent, you do not have to worry about that!
I want to be prepared for these events, and I am already getting ready now. If you are on the path to Financial Independence, these events will still hurt you. But you should be able to withstand them better than most people. This is another excellent thing about FI; it will also improve your finances while working towards financial independence.
Indeed, people on the path to FI have better finances than the average. They can spend less and often earn more. These better finances will help them achieve their goals faster and also withstand financial troubles easier.
For me, this is the best reason to aim for Financial Independence.
Spending time with your family is essential. But often, we spend too much time at work or doing other things than caring for our family and friends.
Financial independence gives us more freedom to be present for our family and create stronger ties.
I wish I will have more time in the future to spend with my children and develop stronger relationships with my wife, children, family, and friends.
Of course, I am not delaying that! It is important not to use FI as an excuse for postponing spending time with dear ones. But being financially free helps in having more time to do more things that matter.
3. Freedom of choice
Most people who want to reach FI want to retire early.
I also think I want to retire early. However, the ability to retire early is more important than retirement itself. Having the choice to retire is very important.
Currently, I still like my job. If I were not developing software for my company, I would be developing software for fun. But who can say if that will still be the case in 10 or 20 years? Nobody!
Your company can change a lot. Your colleagues can change. Or your boss can change too. You may like your current colleagues and boss. But what if they are replaced by people you do not like? These changes may make a big difference in your job. After some changes, you may not like your job as much as you do now.
You, too, can change! Many people assume they will like the same things in the future. But this is often not the case. People change a lot.
Therefore, having the choice to retire or do something else is very important to me. Once I reach FI, I could retire, or start a company or do anything else. Many people reach FI and do not retire. Some people are continuing some side hustles. And some people are doing charity work for very low wages. You can still pursue FI even though you do not plan to retire.
4. Time is limited
Time is also a fundamental fact. Time is very limited.
Let’s say you have 80 years of life in total. You do not want to spend 65 years working, and you want to be free for as many as possible of these years. You may still be working to the end, but you may retire or change your habits. And you may also cut your working time. All these things are possible when you are financially independent.
I like my job. But there are many other things I enjoy in life, and I would rather have more time doing more things than working five days a week until 65 years old. If I were Financially Independent, I would also consider part-time work as a good option.
5. A challenge
One thing I like about trying to reach Financial Independence is that reaching FI is challenging. Indeed, it is not obvious for most people to reach FI before retirement.
Retiring early is also a challenge. Even though the principles are elementary, the achievement of these principles is far from trivial. Before I knew about financial independence, I did not even think it was possible to achieve that.
It is good to have some challenges in your life. It can teach you a lot. You have to learn new things like investing. I have read many books about personal finance and investing. I have learned a lot in less than one year on the path to financial independence. But this is invaluable knowledge!
6. An awesome journey
Not only is the path to FI challenging, but it is also very interesting.
I would even say it is a fun journey. The road to FI is made of a lot of number crunching. You need to calculate your net worth. You can even calculate your FI Ratio to see how far off the road you are. For me, this is really fun and very interesting. I like numbers a lot.
I also like how I was able to reduce our expenses over time! Before, I was spending much more because I was not considering money with the same view. Now that I am more aware of spending, it has become fun to try to cut down our expenses!
Investing is also really interesting. It takes a lot of research to know what to invest in. And especially, you need to understand why you are investing in each of your positions. There is no point in investing in something if you do not know why!
And my road to FI also made me want to start this blog. This blog is also a great journey. Even though this is not my first blog, I have learned a lot again! And I enjoy writing on this blog a lot.
7. An alternative path
Trying to be financially independent and maybe retiring early (or at least being able to) is a road few people take.
For me, it is good. If everybody were taking the same road, it would be less appealing. Many paths do not include FI, and that is also good. If you prefer to be an entrepreneur and get rich, there is nothing wrong with that.
So far, most of the roads I have taken have been the classical ones. I have gone to a standard school. I have gone all the way to a Ph.D. Finally, I have joined a standard company as a software programmer. I am glad I can now try another road by trying to reach FI. We will see how well I am going to do it!
8. FI teaches good values
Finally, the path to Financial Freedom will teach you some fundamental and good values.
The most critical value for FI is Frugality. It is challenging to reach FI without being frugal, at least to some degree. Some people are going very frugal, and some other people are going relatively frugal only.
Since you will be investing in your path to FI, you will likely learn some Wisdom through it. Investing is something you should do with a lot of thinking without making any rash decisions. Your emotions are your worst enemies when you are investing. And you should learn from your mistakes. For instance, I made a lot of investing mistakes when I started. I am now wiser because I learned from these mistakes.
Another value you will probably learn is that Health is essential. If you want to live long and retire healthy, you need to take care of your body. You should eat healthily and do not push your body (and your mind) over their limits.
In our case, for now, we did not yet change a lot, but through our vegetable garden, we are eating more healthily than before. And by preparing our food ourselves most of the time, we have a better diet than fast-food restaurants. In 2019, we even devised a small Health Plan to keep healthy for longer.
9. Build generational wealth
If you are following a safe withdrawal rate strategy, you are likely to end up with more money than you need at the end. This money could then go on to the next generations of your family.
Many people like the idea of building generational wealth. For me, it is not the main reason to try to reach financial independence, but it is a nice bonus. I would not mind passing on some wealth to the next generation.
Nevertheless, this should not be an excuse for the next generation not to work and rely entirely on this wealth. But this could help them fund their financial independence in due time.
And ideally, you want the next generation to continue passing on this generational wealth, not simply spend it. Therefore, an essential part of this is to give financial literacy to the next generation, and hopefully, they will continue this trend.
As you can see, there are many reasons to try to reach financial independence.
You will have much more freedom once you are financially independent. And your life and the one of your family will be much easier. Moreover, it can teach you a lot of things, and it can be a fascinating journey. My life already improved since I started trying to reach for FI.
Maybe some of these reasons will appeal to you. But perhaps they will not. Not everybody has the same reasons to aim for financial independence. And some people may not want to reach FI at all. There is no reason everybody should embrace the FIRE philosophy. There are many other roads. It is up to you to choose the one that suits you the most.
Do not make the mistake of aiming for FI just because other people do it. If FIRE does not appeal to you, try to reach the goals you want, not the goals of other people!
And keep in mind that not everything is great with FIRE. There are many issues with the FIRE movement.
If you want to become Financially Independent, there are many ways to achieve Financial Independence.
What reasons do you have to try to reach Financial Independence?