There are many reasons to pursue financial independence and there are actually some drawbacks too (which you can read about in my article HERE), but here are the top 10 benefits of financial independence and why I have been so passionate about the whole FIRE movement.
Achieving financial independence occurs when your passive (and semi passive) income sources1 cover your living expenses (your accommodation, food, transport and lifestyle costs). This is usually in the form of investment returns from things like Shares, Investment Properties, Annuities (or other insurance policies), royalties, term deposits and businesses such as websites.
Benefits of Financial Independence
There are many benefits of financial independence, and covered here are:
- Geographic Arbitrage
- Cheaper travel
- Career development
- Reduced stress
- Reduced working hours
- Time for hobbies
- Time to give back
- Time for family
- Saves you money (being poor is expensive!)
When you reach financial independence, it means you are a lot more flexible (or agile) when it comes to your lifestyle. You don’t need to make minimum monthly repayments so you aren’t locked into working a particular job, role or in a specific location. This can let you take advantage of opportunities that others may not be able to – such as short notice travel, projects and events or even helping others in need.
2 Potential for Geographic Arbitrage
Geographic arbitrage is the name given to earning in a stronger currency and living and spending in an area of weaker currency. For example, in the Four Hour work week, Ferris talks about earning in USD and spending in Pesos, which is quite common for many working in online business.
3 Cheap / slow travel
Being financially independent means you can travel according to your schedule. Travelling off peak is a great way to get things cheaper and which gives you more bang for your holiday buck. It also means you aren’t required to be back by a certain date, giving you the opportunity to slow travel and really take in everything which the majority of tourists won’t have the time to see.
4 Career development opportunities
Work is better when you don’t need the money. Being financially independent (or even being a good percentage of the way there with a large emergency fund2) gives you the agility to quickly react to Interstate or overseas career development opportunities. Not requiring a wage to live also opens up the possibility to give back working in not for profits, charities or NGO’s.
5 Reduced stress and anxiety
Knowing you are financially independent is a wonderful thing to reduce stress and anxiety. Growing up below the poverty line I have been no stranger to money stress, and I have seen the conflict it has caused, and how money can be twisted into financial abuse. Whilst being financially independent doesn’t magically ‘cure’ money anxiety (and the FIRE movement can sometimes lead to an obsession feedback loop3), knowing your accommodation, food, transport and lifestyle costs are covered is very reassuring.
6 Reduced working hours
Many people pursue financial independence because being FI gives you the option to reduce your working hours. Many people after becoming financially independent reduce from full time to a part time workload. Again, work is better when you don’t need the money and many workers genuinely love their careers and don’t necessarily want to walk away as the wage is not their primary motivation to work. I know some people who after reaching FI have switched roles completely and picked up casual work whilst travelling.
7 Time for hobbies
In line with reducing your working hours, reaching FI gives you more time to spend on your hobbies or other enjoyable activities. I personally have enjoyed pottering in the garden more, spending time with my plants, chooks and bees, and planning out my future permaculture food forest. I have also spent more time with my dog and my family.
8 Time to give back
You can’t pour from an empty cup. Whilst you certainly don’t need to have reached FI or FIRE’d to give back and help others, reaching FI gives you a great opportunity to give back – to your family, friends and community. I love being able to share my knowledge and time with the community, especially in communal gardens and sharing my love for growing fruits and veggies, beekeeping and low cost index funds!
After I hit FI, I had the flexibility to leave my full time job to become my mums primary carer for the last phase of her life. This was incredibly difficult, but I am very glad I did and I am proud of myself for giving her a better quality of life right till the end, where she passed peacefully in the family home.
9 Time for family
A huge motivator for me on the path to FIRE was the prospect of having time to start (and nurture) a family. Growing up in a single parent household and then seeing the relationship stress many pilots experience (with subsequent divorce and family issues), I recognise and respect the amount of time and effort required for a healthy family dynamic.
10 Being financially independent saves you a lot of money
Being poor is expensive – this is one of life’s cruel realities. It is often so expensive that people can even get trapped into the poverty cycle or living pay check to paycheck. A good example is the expensive RM Williams boots I bought– Whilst these were $300 a pair (12 years ago), $25 a year for shoes is much cheaper than replacing cheap work shoes every 6 months for $50!
Also, consider not having to rely on hugely expensive childcare4 every day of the week (and instead just using it once or twice a week) – many families realise it’s actually cheaper to have one parent stay at home rather than work for this aspect alone!
Opportunity and privilege, partnered with a good work ethic and discipline can create more than enough wealth to be financially independent – the flip side to the poverty cycle5 is that wealth creates wealth. My Mum used to sometimes joke ‘The rich get richer and the poor get children!’
You achieve financial independence when your passive (and semi passive) income sources cover your cost of living. This removes your requirement to work to survive, and gives you a lot of freedom over how you spend your time – freeing it up for things like family, hobbies and travel. Having wealth behind you ironically saves you money, making it almost effortless to maintain financial independence!
Are you pursuing financial independence? What’s your why?? Do you have the desire to retire early, or are you pursuing time freedom, or both? Do you think reaching FI would change your spending habits? Let me know in the comments!
- ‘Best Passive Income Ideas’, Jo Groves, Johanna Leggatt, Forbes. Published: Oct 6, 2022. Accessed online at https://www.forbes.com/advisor/au/investing/best-passive-income-ideas/ on Jan 3, 2023.
- ‘Emergency Fund’, Daniel Kurt, Investopedia. Published (updated): Feb 9, 2022. Accessed online at https://www.investopedia.com/terms/e/emergency_fund.asp on Jan 3, 2023.
- ‘4 Signs You May be Obsessed With the FIRE Movement’, Medium.com. Published: July 23, 2020. Accessed online at https://medium.com/the-post-grad-survival-guide/4-signs-you-may-be-obsessed-with-the-fire-movement-782a1ba7c8a1 on Jan 3, 2023.
- ‘Sydney childcare services among the most expensive in the nation’, Katina Curtis, SMH. Published: Oct 26, 2020. Accessed online at https://www.smh.com.au/politics/federal/sydney-inner-city-childcare-services-the-most-expensive-for-parents-20201024-p5687q.html on Jan 3, 2023.
- ‘POVERTY IN AUSTRALIA’, The Smith Family. Accessed online at https://www.thesmithfamily.com.au/poverty-in-australia on Jan 3, 2023.
Captain FI is a Retired Pilot who lives in Adelaide, South Australia. He is passionate about Financial Independence and writes about Personal Finance and his journey to reach FI at 29, allowing him to retire at 30.