Financial Independence

What If Passive Income Isn’t Necessary?

Financial independence is a state of personal finance in which you do not have to depend on your time and labor to finance your life. The typical path to get there is to build a steady stream of passive income from capital investments, allowing you to live your life without any financial worry, in perpetuity. This state also gives you the option, but not the obligation, to retire from work, if that’s what you want.

If what I seek from life is satisfaction and peace of mind, the prospect of financial independence certainly seems to help. But let’s face it: it’s hard to achieve. First of all, it would be quite unpleasant if I had to regress on my standard of living, especially with a family and kids. And even though I always lived well within my means and managed to save close to half my income for many years, it would still take me a long time to accumulate enough wealth to live off forever.

And here’s the other thing: I have no intention of retiring. Work gives me satisfaction, and I intend to continue working for as long as I’m able to. I believe we humans derive satisfaction from contributing to society, and getting paid is a reasonably good measure of that contribution.

So if I’m going to be working for money anyway, and if I’m protecting myself and my family from my inability to work with insurance, does financial independence do anything for my satisfaction and peace of mind?

One argument could be that it could give me more freedom to choose what to work on. But I certainly shouldn’t need a lifetime-long runway to find work that I can do on my own terms while doing things that intrinsically motivate me. I believe that just a small number of years should be more than enough to give me a decent chance of finding sustainable and satisfying work without risking any consequential harm from uncertainty.

I prefer to pursue a looser definition of financial independence—one that I can achieve by becoming financially independent from things outside of my control, rather than from my time and labor. I would enter this state when I can expect to always have sufficient finances to do and protect the important things in my life. I believe I can achieve this type of financial independence much more easily, and without having to accumulate substantial financial assets. The asset that will enable it will be my work.