Why Is It So Difficult To Become Financially Independent

The Illusion of a High-Paying Job

You may believe that a high-paying job holds the key to achieving your lifelong dreams. However, it is important not to rely solely on this assumption. If you want to attain true financial independence, you must go beyond the conventional mindset. Surprisingly, your job, if not utilized correctly, can hinder your progress.

“The reason you can’t truly be financially independent if you rely on outside income from a source other than your own investments or businesses is that those sources of income are not entirely within your control. If you’re dependent on a job, for example, you’re at the mercy of your employer. If you rely on government assistance, policy changes could affect your income. True financial independence means having control over your income sources.”

Defining Financial Independence

Before we delve deeper into the challenges of financial independence, let’s clearly define what it entails. While money is undeniably a significant factor, financial independence is not solely about wealth accumulation. It encompasses the ability to survive adverse circumstances.

“Being financially independent means you are financially secure if you lose your job, your business fails, or the market worsens. To be financially independent, if any of these things happen and you can survive without seeking financial assistance from elsewhere, you will have set yourself up for future success.”

“Being financially independent refers to a state where an individual has achieved a level of financial stability and freedom, enabling them to meet their financial needs and goals without being reliant on external sources of income. It means having accumulated sufficient wealth and assets to sustain one’s desired lifestyle, cover expenses, and plan for the future, without the necessity of working for a regular paycheck. Financial independence grants individuals the flexibility and autonomy to make choices based on personal preferences, rather than financial constraints.”

The Importance of Financial Independence

Now that we understand the essence of financial independence, let’s explore why it is a worthy pursuit. The journey towards financial independence may seem arduous and discouraging, deterring many from even attempting to embark on it. However, the rewards of achieving true financial independence are significant and life-changing.

Imagine the freedom of having your assets generate enough income to cover living expenses, relieving you from the need for traditional employment. It is akin to being on a perpetual vacation, where your money works for you instead of you working for your money.

To reach this stage, you must build a solid foundation. Financial independence requires sufficient financial resources and assets to sustain your desired lifestyle without relying on external sources of income. This includes investment income, savings, and passive income streams.

Assessing Financial Independence

Determining the exact amount of money needed for financial independence is a common question. While there are general rules of thumb, such as having 25 times your annual spending in a retirement or savings account, the answer varies depending on your individual circumstances and future goals.

To assess your financial independence, you must evaluate your current financial situation and consider whether you can maintain your desired lifestyle without relying on external income or assistance. Several key indicators can help you gauge your level of financial independence.

It all begins with creating a budget. This may pose a challenge for many individuals. Without a clear understanding of your living expenses, it is impossible to determine the income required to achieve financial independence. Your expenses provide a target for the income you need to generate.

Having a stable and sufficient income that covers your essential expenses is crucial. If your income exceeds your basic needs, such as housing, utilities, food, transportation, and healthcare costs, it is a positive sign of financial independence. Moreover, having surplus income to save and invest for the future further strengthens your financial position.

While the numbers play a vital role in financial independence, it is ultimately your sense of fulfillment that confirms your achievement. You will know you are financially independent when your passive income from savings, investments, rental income, etc., covers your living expenses. It is the feeling of waking up in the morning, knowing that whether or not you work that day, your bills will be paid, and your desired lifestyle can be maintained.

Once you reach the pinnacle of financial independence, you will realize that the journey was not as daunting as it initially seemed.

What is the Average Income in Different Countries?

When considering financial independence, it is helpful to understand the average income levels in different countries. Here’s an overview of the average incomes in the UK, America, Italy, Greece, and India:

United Kingdom (UK)

As of 2021, the average gross annual income in the UK is around £30,000 to £35,000 ($41,000 to $48,000 USD). However, it’s important to note that income levels can vary significantly depending on factors such as job sector, location, and experience.

United States of America (America)

In the United States, the average annual household income was approximately $68,703 in 2020. However, this figure can vary considerably based on factors like geographic location, occupation, and educational attainment.

Italy

In Italy, the average gross annual income is around €29,000 to €31,000 ($34,000 to $36,000 USD). However, it’s worth noting that income levels can differ significantly depending on factors such as profession, industry, and region.

Greece

In Greece, the average gross annual income is around €16,000 to €20,000 ($18,700 to $23,400 USD). It’s important to keep in mind that Greece experienced an economic crisis in recent years, which has impacted income levels and employment opportunities.

India

In India, income levels can vary significantly due to the country’s vast economic diversity. As of 2021, the average annual income in India is around INR 1.3 lakh to INR 1.8 lakh ($1,700 to $2,400 USD). However, it’s important to note that income disparities are significant, with a significant portion of the population earning much lower wages.

Please keep in mind that these figures represent average incomes and can fluctuate over time. Additionally, there are various factors that influence individual income levels, including education, skills, experience, industry, and job market conditions.