6 ms·

Financial Independence: What If Passive Income Isn't Necessary?

39 points by DVassallo 8y ago

bitxbitxbitcoin 8y ago
It sounds like what you're describing is financial comfort/stability more than true "independence." That being said, those that seek traditional financial independence aren't exactly free from bad beats that might destroy their nest egg and force them to become financially dependent on their labor again.
olcor 8y ago
Living off interest and investments seems to be a recent phenomenon (FIRE). My grandmother ensured that all her well-off children never sat on their laurels and depended solely on passive income even though it could be considerable. The goal was to keep the mind fresh and running, and to be a productive member of society even if you didn’t exactly need to work. If you had more, you could give back more, but stopping work was always heavily discouraged.
- toomuchtodo 8y ago
  Works fine if you have a safety net. Doesn’t if you can’t work for whatever reason. Plenty of people in their 50s who have been out of work for months or a year and can’t get a job because no one will hire them. So you hustle to hopefully crate your own safety net (passive income).
  - olcor 8y ago
    Agreed; I'm not talking about people who don't have a safety net. I'm talking about folk wisdom discouraging people who already have a rather substantial one where they definitely do not need to work. The idea is that sloth is addictive, and often sends the wrong message to the children.
    - astura 8y ago
      I mean, most early retirees don't aspire to live a life of sloth...
- knn 8y ago
  What do you mean by recent? There's been a whole society of rentiers living solely off investment income in most countries for at least the last 300 years, if not several thousand years. It's extremely well documented, especially in Britain and France since the early 1800's (see Thomas Piketty's work on wealth distribution). The more capital one owns, in general, more income is earned from capital rather than wages. This ratio increases sharply when you look at the top 1% and 0.1% of owners.
  - speedplane 8y ago
    > What do you mean by recent? I think the recent phenomenon is that many folks with moderate levels of income and initial capital have become convinced that they can attain financial freedom. Pickety's research does not support that, in fact, it supports the opposite conclusion: the only way to get wealthy, is to start wealthy.
    - alexgmcm 8y ago
      It's like that quote attributed to Steinbeck - "Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires."
      - QualityReboot 8y ago
        Temporarily embarrassed millionaire American here. I can't make universal health care and UBI happen. The next best thing is to acquire wealth so I can some day avoid the drudgery of working life. Maybe.
    - deleted 8y ago
      [deleted]
    - SeanAppleby 8y ago
      That's an ironic claim on this platform. If you make $200k/year (normal high tech comp, probably not far from the average person here), save $100k/year and average 6.5% returns over 10 years, you have $1.4M. You can then on average draw down $63k/year assuming 2% inflation to retain your purchasing power until the end of time. That's very comfortable if you're just willing to not live in the bay area or NYC.
- deleted 8y ago
  [deleted]
idDriven 8y ago
The idea that the amount of money you make working is in any way a 'measure of the benefit you provide society' is pathological. Many of those who provide the most benefit are paid a suppance.
- DVassallo 8y ago
  Author here. I didn't mean it's the only measure. Or that it's a perfect measure. But if you were to give me your hard earned money for something I do to you, it's very likely that I provided something useful to you.
mark_l_watson 8y ago
Well, the author has one opinion, I have another: acquiring deep assets (income property, stock market, investment in businesses, farms, etc.) should be a natural thing that people do. You never know what might happen in life and building deep assets is a hedge. A wonderful result of conservatively building assets is that assuming things go well and you don’t need them, assets can be passed on to younger generations. What the author of the article is promoting is not financial independence, it is simply finding a pleasant job and then enjoy life. Good advice but no reason to not also build up assets.
lazylester 8y ago
The daily structure of work life allows one to avoid facing some questions that otherwise arise. Financial independence forces one to explore how one wishes to spend one's time when the work constraints are eliminated. This can be a very exciting, fruitful and rewarding endeavour. I highly recommend it.
scarface74 8y ago
Because of $bad_life_decisions I made in my late 20s to mid 30s, recovering from those bad decisions for the last few years and getting married, (gladly) taking responsibility for two step children, “retirement” is not in the cards for me anytime soon. But, I’m okay with that. I’ve been a software developer for 20+ years and I’ve never hated my career. I have hated my job at various points but as long as I kept my skills marketable, I could always get another job. The only burnt out I’ve ever felt was the politics of corporate America. I’ve learned sticking with small companies was the best way for me to avoid that or being a contractor/consultant where I don’t care about the politics. That being said, my wife did choose a low stress, relatively low pay job with the school system that guarantees us lifetime access to health insurance after 10 years to allow me to just jump back and forth between being a salaried employee, contractor, consultant or not having to work for a few months.
deleted 8y ago
[deleted]
adrianmsmith 8y ago
The author makes two assumptions which are either wrong, or at least I don't think they apply to me. - "it would be quite unpleasant if I had to regress on my standard of living", this makes the assumption that how great your life is is dependent on how much money you spend. That assumption sounds obvious, and I made it for decades. I realize now it just isn't true. I can meet my friends somewhere cheaper and have just as much fun. I can cook at home and, although it's more effort, it can be just as good if not better than the takeouts I used to get every day. Making the effort to have relationships with people in the city I live in, as opposed to finding people on the internet on the other side of the planet. At least for me, I was able to cut down on my expenditure significantly without cutting down on the pleasure I had in life. - "Work gives me satisfaction, and I intend to continue working for as long as I’m able to.". When I was in my 20s, my girlfriend's father was near retirement, also a software developer, and he seemed to try and do as little work as possible. I didn't understand, I was building great stuff (my first job was at a social network in Europe, with 6m users and about 50 servers), I loved it. I assumed I'd always want to work and would never be like him. Now I'm in my 40s, that social network has long been taken offline, most of the work I've done for startups is no longer online, my one stint at a large company involved politics making me write worse code (e.g. 1y with a team of 15 developing basically a static website, we wrote our own CMS because it meant the company could bill its customer more hours). What I mean is, just because you are enjoying work now, doesn't mean you'll enjoy work forever. The author builds their argument on these two assumptions, which (at least for me, but I'd say for everyone) aren't valid.
- DVassallo 8y ago
  Author here. I addressed those 2 points in another blog post: https://danielvassallo.com/only-intrinsic-motivation-lasts/ https://danielvassallo.com/only-intrinsic-motivation-lasts/ In short, no I'm fully cognizant that satisfaction is not dependent on how much I spend or earn. And I did my best to keep my standard of living abundantly within my means, even when my income grew 10X over the last 9 years. However, when you have other people living with you, it's not as simple to disrupt their life by moving somewhere else, or making drastic changes. We never eat out, we don't go on expensive vacations, kids will go to public school (in preshool now), and we have no extravagant hobbies. Nevertheless, just our housing and insurance costs are $84K/year in Seattle. That's before food, utilities, etc.
deleted 8y ago
[deleted]
yhavr 8y ago
Well, really, there is no binary choice "work for money" and "don't work at all", but rather a huge spectrum: "work at a shitty job", "work at an awesome job", "be a contractor and take sabbaticals every half of a year", "have a small stream of passive income and cool freelance gigs",... Therefore limiting your attention to the final stage which is quite hard to achieve, it's quite unoptimal.
IlyaStam 8y ago
Financial independence is important if you have better things to do with your time than work. And if that’s not the case - keep on workin! :)
arcaster 8y ago
Why would you not want passive income if you had the means to attempt to or outright realize these kinds of income sources? This article wreaks of a bizarre misdirected form of moral superiority and relativism....

39 points by DVassallo 8y ago

It sounds like what you're describing is financial comfort/stability more than true "independence." That being said, those that seek traditional financial independence aren't exactly free from bad beats that might destroy their nest egg and force them to become financially dependent on their labor again.

olcor 8y ago

Living off interest and investments seems to be a recent phenomenon (FIRE). My grandmother ensured that all her well-off children never sat on their laurels and depended solely on passive income even though it could be considerable. The goal was to keep the mind fresh and running, and to be a productive member of society even if you didn’t exactly need to work. If you had more, you could give back more, but stopping work was always heavily discouraged.

toomuchtodo 8y ago
Works fine if you have a safety net. Doesn’t if you can’t work for whatever reason. Plenty of people in their 50s who have been out of work for months or a year and can’t get a job because no one will hire them. So you hustle to hopefully crate your own safety net (passive income).
- olcor 8y ago
  Agreed; I'm not talking about people who don't have a safety net. I'm talking about folk wisdom discouraging people who already have a rather substantial one where they definitely do not need to work. The idea is that sloth is addictive, and often sends the wrong message to the children.
  - astura 8y ago
    I mean, most early retirees don't aspire to live a life of sloth...
knn 8y ago
What do you mean by recent? There's been a whole society of rentiers living solely off investment income in most countries for at least the last 300 years, if not several thousand years. It's extremely well documented, especially in Britain and France since the early 1800's (see Thomas Piketty's work on wealth distribution). The more capital one owns, in general, more income is earned from capital rather than wages. This ratio increases sharply when you look at the top 1% and 0.1% of owners.
- speedplane 8y ago
  > What do you mean by recent? I think the recent phenomenon is that many folks with moderate levels of income and initial capital have become convinced that they can attain financial freedom. Pickety's research does not support that, in fact, it supports the opposite conclusion: the only way to get wealthy, is to start wealthy.
  - alexgmcm 8y ago
    It's like that quote attributed to Steinbeck - "Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires."
    - QualityReboot 8y ago
      Temporarily embarrassed millionaire American here. I can't make universal health care and UBI happen. The next best thing is to acquire wealth so I can some day avoid the drudgery of working life. Maybe.
  - deleted 8y ago
    [deleted]
  - SeanAppleby 8y ago
    That's an ironic claim on this platform. If you make $200k/year (normal high tech comp, probably not far from the average person here), save $100k/year and average 6.5% returns over 10 years, you have $1.4M. You can then on average draw down $63k/year assuming 2% inflation to retain your purchasing power until the end of time. That's very comfortable if you're just willing to not live in the bay area or NYC.
deleted 8y ago
[deleted]

idDriven 8y ago

The idea that the amount of money you make working is in any way a 'measure of the benefit you provide society' is pathological. Many of those who provide the most benefit are paid a suppance.

DVassallo 8y ago
Author here. I didn't mean it's the only measure. Or that it's a perfect measure. But if you were to give me your hard earned money for something I do to you, it's very likely that I provided something useful to you.

mark_l_watson 8y ago

Well, the author has one opinion, I have another: acquiring deep assets (income property, stock market, investment in businesses, farms, etc.) should be a natural thing that people do. You never know what might happen in life and building deep assets is a hedge. A wonderful result of conservatively building assets is that assuming things go well and you don’t need them, assets can be passed on to younger generations. What the author of the article is promoting is not financial independence, it is simply finding a pleasant job and then enjoy life. Good advice but no reason to not also build up assets.

lazylester 8y ago

The daily structure of work life allows one to avoid facing some questions that otherwise arise. Financial independence forces one to explore how one wishes to spend one's time when the work constraints are eliminated. This can be a very exciting, fruitful and rewarding endeavour. I highly recommend it.

scarface74 8y ago

Because of $bad_life_decisions I made in my late 20s to mid 30s, recovering from those bad decisions for the last few years and getting married, (gladly) taking responsibility for two step children, “retirement” is not in the cards for me anytime soon. But, I’m okay with that. I’ve been a software developer for 20+ years and I’ve never hated my career. I have hated my job at various points but as long as I kept my skills marketable, I could always get another job. The only burnt out I’ve ever felt was the politics of corporate America. I’ve learned sticking with small companies was the best way for me to avoid that or being a contractor/consultant where I don’t care about the politics. That being said, my wife did choose a low stress, relatively low pay job with the school system that guarantees us lifetime access to health insurance after 10 years to allow me to just jump back and forth between being a salaried employee, contractor, consultant or not having to work for a few months.

deleted 8y ago

[deleted]

adrianmsmith 8y ago

The author makes two assumptions which are either wrong, or at least I don't think they apply to me. - "it would be quite unpleasant if I had to regress on my standard of living", this makes the assumption that how great your life is is dependent on how much money you spend. That assumption sounds obvious, and I made it for decades. I realize now it just isn't true. I can meet my friends somewhere cheaper and have just as much fun. I can cook at home and, although it's more effort, it can be just as good if not better than the takeouts I used to get every day. Making the effort to have relationships with people in the city I live in, as opposed to finding people on the internet on the other side of the planet. At least for me, I was able to cut down on my expenditure significantly without cutting down on the pleasure I had in life. - "Work gives me satisfaction, and I intend to continue working for as long as I’m able to.". When I was in my 20s, my girlfriend's father was near retirement, also a software developer, and he seemed to try and do as little work as possible. I didn't understand, I was building great stuff (my first job was at a social network in Europe, with 6m users and about 50 servers), I loved it. I assumed I'd always want to work and would never be like him. Now I'm in my 40s, that social network has long been taken offline, most of the work I've done for startups is no longer online, my one stint at a large company involved politics making me write worse code (e.g. 1y with a team of 15 developing basically a static website, we wrote our own CMS because it meant the company could bill its customer more hours). What I mean is, just because you are enjoying work now, doesn't mean you'll enjoy work forever. The author builds their argument on these two assumptions, which (at least for me, but I'd say for everyone) aren't valid.

DVassallo 8y ago
Author here. I addressed those 2 points in another blog post: https://danielvassallo.com/only-intrinsic-motivation-lasts/ https://danielvassallo.com/only-intrinsic-motivation-lasts/ In short, no I'm fully cognizant that satisfaction is not dependent on how much I spend or earn. And I did my best to keep my standard of living abundantly within my means, even when my income grew 10X over the last 9 years. However, when you have other people living with you, it's not as simple to disrupt their life by moving somewhere else, or making drastic changes. We never eat out, we don't go on expensive vacations, kids will go to public school (in preshool now), and we have no extravagant hobbies. Nevertheless, just our housing and insurance costs are $84K/year in Seattle. That's before food, utilities, etc.

deleted 8y ago

[deleted]

yhavr 8y ago

Well, really, there is no binary choice "work for money" and "don't work at all", but rather a huge spectrum: "work at a shitty job", "work at an awesome job", "be a contractor and take sabbaticals every half of a year", "have a small stream of passive income and cool freelance gigs",... Therefore limiting your attention to the final stage which is quite hard to achieve, it's quite unoptimal.

IlyaStam 8y ago

Financial independence is important if you have better things to do with your time than work. And if that’s not the case - keep on workin! :)

arcaster 8y ago

Why would you not want passive income if you had the means to attempt to or outright realize these kinds of income sources? This article wreaks of a bizarre misdirected form of moral superiority and relativism....