Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective
07.04.2008
Declaration of Independence

from US Declaration of Independence
Creative Commons License photo figure credit: ricardo.martins

The 4th of July in the United States marks our independence from British rule. It’s also an appropriate day to declare Financial Independence. What is financial independence? It’s probably something different to each and every person.

For me, financial independence would be the freedom from having to answer to someone else for my livelihood — in other words: I don’t want to have a boss anymore. It’s not that my boss is that bad — he’s pretty good actually (had to say that in case he’s reading… ;). But the simple fact is that on any given weekday I have to get up and go to work for him and not me.

A second level of financial independence would be the freedom from having to work at all — having all of my income come from passive sources. This is a typical definition of retirement where one’s income is derived from dividends and the sell off of substantial investments, social security, rent payments, etc. This would free me up to do what I want to do rather than what someone else wants me to do.

So how do I get from here to there? I’ve been thinking for many years about starting my own business, but that’s about as far as I get. I’ve had a million business ideas over the years, but never had any confidence that someone would actually buy my service(s). The major thing that I’m missing is capital to start the business and/or the funding to live on until the business is up and running and turning a profit.

Therefore, in the mean time, I am focusing on the accumulation of capital part of the problem. With just $100 more each for ScrapperMom and I, we will have fully funded our tax advantaged Roth IRA retirement accounts for the year. So today I will make a new first step on my road to financial independence: I will create savings accounts to use for funding a future business venture, a single family home, and a late model used car. We have no specific time horizon for these expenditures yet, but first things first. Once these accounts are created, I will set up an monthly automatic deposit into each of them following the “pay yourself first” principal.

To help accelerate these savings goals I will begin to divert some of the money that we have been using to pay down low interest debts. I have written previously here and here about the question of investing/saving or paying down low interest debt. So today on Independence Day, I will finally put my plan into action.

Regardless of one’s definition of Financial Independence, most of us are probably not yet financially independent. But as Lao-tzu, Chinese philosopher (604 BC - 531 BC) said:

“A journey of a thousand miles begins with a single step.”

So take a few minutes today to decide what being financially independent means to you, and then make a single step on your journey. It might be your first step, or your middle step. Maybe it’s even your last step. But take a step today, and then share your definition of Financial Independence and the step you took today in the comments section below.

Happy Independence Day to Everyone!

5 Responses to “Financial Independence Day”


  1. Rachel Says:

    Today I helped another person take a step, instead, by lending $100 to Carmen Ortega in Paraguay through kiva.org. It’s something I do every month. By lending money to small-scale entrepreneurs through Kiva instead of simply giving money, I can help them in their current endeavor, help them gain a credit rating, AND enable my money to be lent out again and again, as loans get paid off and I re-lend the money. I’ve had 15 loans fully paid back in the 3 years I’ve been working with Kiva, and all that money has gone back out to help others.

    Carmen is still raising funds, as are many other businesses, and I hope people will take a look!

    http://www.kiva.org/app.php?page=businesses&action=about&id=53841

    As for me, well… as you point out, there are many shades of financial independence. My husband and I did come to an agreement earlier this week on how much to overpay our mortgage; a tiny step toward paying the thing off.


  2. MITBeta Says:

    Rachel:

    That’s a great step!


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