Why I no longer chase financial freedom
There's a better goal to work towards
“$1mil invested at a 5% dividend yield will give me $50k in dividends per year.”
“Once I reach a certain level of wealth, I’ll be free.”
These are some of the statements I used to tell myself.
While it’s good to have a good financial plan in place, this mindset also comes with a few pitfalls.
Inflation
The value of our money does not stay the same.
Remember our good friend, inflation? $100 now will feel like $10 a decade later (okay I exaggerate).
To combat inflation, the company will have to grow its dividends.
Dividend Cuts
It may feel nice to see dividends coming in from a company you own.
But what if one day, a company decides to cut its dividend, or remove it altogether?
This is a risk factor that is ever present, and one that all investors need to be aware of.
Time
Assuming you hit your magic figure (whatever that may be), what are you going to do with your time?
Sit at the beach sipping Pina Coladas?
Watch Netflix and chill all day?
No matter how much you enjoy doing your favourite activity, it’ll get boring after awhile.
Financial Confidence — a better answer to financial freedom?
Financial confidence is having confidence in your ability to earn money, regardless of economic conditions.
This means you need to continually develop and hone your skills, such that no automation or AI puts your income source at risk.
Which also means you need to have more than 1 income source, ideally uncorrelated to each other.
Conclusion
I hope this gives you another perspective. It’s okay to pursue financial freedom, but don’t forget financial confidence too.
Work is an important part of mental health. Without work, we lose our sense of purpose. A lack of purpose can take its toll on our mental health.