Nothing is as it should be this year. 2020 will go down in history as one of the worst years for my generations (X / Z – I am right on the brink). Highest unemployment in history across the globe. People restricted to travel between countries, in some areas even between cities. Foodbanks, charities and NGOs getting people through hard times even in the most developed nations.
Every weakness of our economic systems has been exposed by now. The mantra of a small government and an unhinged economy has been crushed to pieces. Whether it’s Germany, the US, UK or Thailand: Without government support it would all collapse.
It’s a terrible situation, but we will get through this. There is light at the end of the tunnel, and I am also confident that we will thrive again once this is all over. And having said that, as bad as it is, it’s also a great lesson and experience for us. Instead of lamenting and complaining, we have right now the opportunity to analyse the situation and to think about how we can handle a similar occurrence in the future.
The solution is, financial independence.
The rules that society is putting on us are still the same. They don’t change even in the current crisis. People talk about better education, job creation, minimum wages. And it’s all good and right. We need to work, we need to accumulate knowledge. We should be fairly rewarded for our input in the economy. But to really protect yourself, you got to break out of those rules and take ownership of your future. You got to get financially independent.
Being financially indpendent means that you have to ensure that you can afford a shelter no matter what, that you can get food on the table without relying on charities, and that your health is protected. Financial independence is not about getting rich. It’s about freedom.
The steps for reaching financial independence are only a few:
- Earning as much as you can
- Spending as little as possible
- Saving and investing the surplus
- Building passive income
Only four steps that explain it all. Simple and while not easy, definitely achievable with the right mind-set, plan and determination. And the benefits are immense. Not only may it allow you to retire early from your regular job. Achieving financial freedom will also empower you to pursue other paths and passions which you might have not considered previously due to financial commitments that couldn’t get neglected.
Even more importantly though, it will also prepare you for hardships, and situations as we are experiencing right now. It’s undeniable that those who build up emergency funds that cover 6-12 months of expenses, or who have passive income streams, are significantly less worried while the virus is causing panic and havoc across the world.
The FIRE movement is just a smart thing to do
When you explain the idea of financial independence and the FIRE movement to people who never thought about it, you will hardly find anyone who would disagree with it these days. There is nothing about massive unemployment, stagnant wages, and deteriorating economic conditions that would encourage people to go back to the old days.
And this is not a one-off event. It will happen again. Maybe it will be another virus. Maybe something else. But we know that hard ships are part of the equation throughout our lives. So wouldn’t it be a smart thing to do something about it? To prepare for it?
As my readers know, I am promoting investing in stocks. And surely, many companies got in trouble and had to cut or reduce their dividends, hence also impacting my passive income. But what this crisis showed me clearly is that while there is no 100% protection in this kind of environment, the odds are still clearly favouring investors over regular workers.
I work in the hardest hit industry of the pandemic: I am a hotel manager. And while my salary was cut by up to 40% as my hotel had to close for a few months, my passive dividend-income went down only by 9% on average year to date so far, and I expect it to remain on that level.
If you ever had doubts whether FIRE is for you, these doubts should be gone by now. And whether you invest in stocks or real estate, or any other way that generates passive income streams, it should be (or become) a part of your plan.