Financial Independence: Truth or Fiction?

Everybody heard of financial independence, and many consider it as one of the main goals. However, these people often understand it wrong. The following article describes several well-known facts about it and checks if they indeed true or not.

Only Facts

Financial independence is a situation or a state when a person can maintain his existence without working or dependency on other people. In other words, a financially independent person relies only on sources of passive income.

There are lots of passive income sources, including bank deposits, dividends, business income, property renting, and so on. Some of these sources are stable, others maybe not, but they have the same common trait — they allow earning money without doing anything substantial. And here we can see the most controversial fact — getting money for doing nothing is not equal to being financially independent.

Independence assumes that some person does not rely on external factors to achieve what he wants. If we try to apply this rule to passive income sources, we can see that all these sources still depend on other people, the country's economy, ruling political party, etc. So, passive income is not actual financial independence but rather a source of income with implicit dependencies.

But what should we do to achieve true financial independence?

Planning and Actions

Sad, but true — financial independence may be impossible in many cases. It is tough to build a closed environment with complete control, so the most possible it will be only partial independence. It does not mean that you should give on passive income, though.

The first thing that most people are doing after receiving enough passive income stops working or doing anything. Such an approach is not good, as the person stops personal and professional development and helps neither the local nor global community.

You should continue to plan your budget and expenses no matter if you have passive income or not. In any case, this activity gives you an overview of your current situation and ensures proper management of financial resources in the future.

You may also continue financial optimization and review the list of income sources (both active and passive). This review may indicate that some income sources are becoming less profitable, so you may need to invest your resources elsewhere.

And there is one more overall recommendation. Think about financial independence not about a goal but rather as a tool that allows you to live the life you want and achieve greater goals!