Financial freedom, as I see it, is an amazing lifestyle.
It’s indeed that freedom that allows one to see the whole world in a different light.
You become free from not just financial concerns (i.e., how will I pay rent or pay for food?); you become free from societal expectations, certain routines, jobs you don’t want to do, and what could be argued a somewhat mindless existence inside of a bubble.
Now, this freedom does not make you less than.
If anything, it makes you more than. You become more than you otherwise ever likely would have ever been. You become more than you.
That’s because that aforementioned freedom also allows you the freedom to become a bigger, better, stronger, faster, and smarter version of yourself. And through this process of personal evolution and growth, you become happier as you strive toward your potential as a human being.
However, as wonderful as financial freedom is – built upon the foundation of enough passive income to cover your basic needs/expenses in life – I believe there’s still a ton of value in earning active income (income you earn by exchanging your time/efforts/skills for money through work you passionately enjoy).
How Active Income Complements My Passive Income
First, I believe it’s almost automatic that someone is going to go on and continue earning active income well after financial independence is achieved.
This is why I also believe that the math behind early retirement (which way too many people obsess over) is largely moot.
In fact, one could argue the whole concept of “early retirement” (i.e, the steadfast and permanent stoppage of work altogether at a very early age) is unrealistic and unnecessary. While financial independence adds so much value to one’s life, I’m not sure the idea that you’re going to just never work again at, say, 35 years old (or some other silly number) provides any value at all. Nor do I think it’s appealing or realistic.
But what’s fantastic about this situation is that which is likely inevitable is also complementary in many ways.
The foundation upon which I’ve built my life is financial freedom.
I’m paid just to get up and go about my day.
The 100+ businesses I’m invested in are selling products and/or services to people all over the world, earning a lot of money in the process. Furthermore, these businesses tend to earn more and more money over the course of time (as they sell more products and/or services at increasing prices to more people). And since shareholders are truly the collective owners of any publicly traded company, these businesses share that growing profit with their shareholders in the form of growing dividends.
This situation has truly freed me.
Rent is covered. My food is paid for. I don’t have to check the couch cushions for money to pay my utilities. So on and so forth. It’s like a wealthy benefactor has offered to pay for my bills indefinitely. Moreover, this benefactor is almost surely going to send me more and more money every single year, likely increasing these payments at a rate faster than my expenses expand.
That means I’m free to concern myself with much larger and more important issues and pursuits. And there’s so much value in that.
But while my passive income covers my basic needs in life, that’s really all it covers.
If I want to continue my investing activities (which I enjoy), or give money away (which I also enjoy), or do any other multitude of activities (like, say, traveling), my passive income just isn’t there yet. It will be one day, but that day is not today.
This was partly by design, though, as I quit my day job at 32 years old, already understanding the basic tenets that I currently expound. I knew that continuing to show up at the job, earn, save, and invest would build a much larger portfolio, but I also realized that time is much more valuable than money. And I also knew that I’d likely go on to earn money anyway, except that I’d do it through working rather than jobbing.
That said, there’s still a ton of value in continuing to work on passionate projects and bring in income over and above my passive income (which is somewhere around $1,200 per month). And it’s not just the happiness that these projects will add to your life (because you’re enjoying them), but it’s also the income they will bring your way.
Would I be as happy as I am if I couldn’t continue to occasionally buy high-quality dividend growth stocks? Would I enjoy my situation as much if I couldn’t support organizations that mean something to me? Is having to make absolute certain that your spending is under a certain low threshold every month, with almost no variance, fun?
Of course not.
But I work on things that matter to me. I find joy in my work. And when you add value to the world, value almost always comes back around to you. It’s like an equation that the universe must make right.
In addition, I find additional life satisfaction from the additional opportunities and flexibility that active income provides me.
I’ve spent my first month in Chiang Mai, Thailand as a dividend expat living out my financial independence dreams.
But I’ve also not held back in terms of visiting the local attractions, meeting up with fellow entrepreneurs over dinner and/or coffee, and taking in the experience of living somewhere so new and wonderful. And I haven’t had to sacrifice some of my larger and long-term visions, either.
I don’t have to worry about paying for the entrance fee into a large park. I don’t have to fret over whether or not a coffee meetup will push me over some predetermined coffee budget. I don’t have to worry if some Uber ride to a faraway location will ruin my life. If I see a high-quality dividend growth stock I want to invest in, I can do so (within financial reason). If there’s an organization that needs my help, I’m free to lend a hand.
So on and so forth.
The active income I earn has afforded me the opportunities and flexibility to approach my life this way – and it’s wonderful. I don’t believe I’d enjoy life as much otherwise.
So while the work I engage in is ultimately about the fulfillment it provides my life, the value that comes my way when I add value also adds additional happiness to my life via the financial compensation I earn from my joyful work.
It’s a multifaceted reward system that one can understand only when they personally experience it and put it all together.
How Passive Income Complements My Active Income
While my active income complements my passive income in so many ways, this dynamic is only possible because I first built a foundation of passive income that has freed me from basic and essential financial concerns in life, rendering me free – in financial and non-financial terms.
See, I’m able to pursue my joyful work without concern or worry precisely because I know that my life is already paid for by the growing dividends that more than 100 of the world’s best businesses are sending my way.
I’m free to write from the heart. I’m free to work with clients I absolutely love working with. I’m free to work on projects that truly bring about joy and happiness. I don’t have to push products/services that I don’t personally use and believe in just for the sake of making a buck.
There’s no pressure. There’s no stress.
As such, the active income comes about in this totally organic and fantastic manner. As I noted earlier, adding value to the world adds value back to your life. It’s like an inescapable destiny. And I’m free to add so much value – value that I love and completely believe in – because I’m free to, which only increases and improves the value that comes back around to me.
If for any reason a pursuit or project doesn’t totally make me happy and joyful, I can just cut it.
But I only have the freedom to do that because I’m financially free. Otherwise, I’d have to work on something for the money it would provide me, almost regardless of total satisfaction derived from the work.
When your rent has to be paid, and you don’t have it covered just by waking up, you have to go out and make a buck – putting the idea of “satisfaction” on the back burner. That’s just how life works.
But financial independence is the foundation upon which one has to build their life. That’s the only way a new dynamic is possible.
Said another way, my active income is able to complement my passive income in such an organic and healthy manner because the passive income was first built to a financially freeing level in the first place.
That complementary relationship allows me to explore new ideas and grow as a writer and entrepreneur in ways that probably wouldn’t happen if money were this massive priority in my life.
So I enjoy what I do. The freedom to enjoy makes the enjoyment much deeper. The enjoyment allows me to work with passion, which delivers value to my life commensurate with the value I add. And this provides a ton of flexibility and opportunities in my life and spending.
Achieving financial independence should be one chapter of an otherwise amazing book. A wonderful chapter, no doubt. But just one chapter.
Once you’re done with that chapter, though, you’ll realize that there’s so much more.
You’ll see that you’re finally free to become more than you. And when this transition happens, the traditional work-life-money dynamic completely changes, with both active and passive income complementing each other in a holistic, organic, and wonderful manner.
At that point, you’ll find that you don’t (or at least shouldn’t) think about money very much. Instead, you’ll be busy adding and receiving value, pursuing passions, becoming a better you, and enjoying your life without worrying about whether or not the $2.00 coffee is going to exceed your passive income allotment for the month.
There’s a ton of value in knowing your basic expenses in life are covered. But there’s also value in generating money on top of the passive income that renders you financially independent (both in terms of adding personal fulfillment and financial flexibility). There’s real value (and happiness) in being able to invest, give away, and spend money beyond your base passive income and expenses.
Finally, just to clear up any confusion, my active is allocated out across the following areas: business expenses, business taxes, philanthropy, extraordinary personal expenses, cash, investing.
Are you financially independent? Have you found that active and passive income complement one another? What have your experiences shown you?
Thanks for reading.
Image courtesy of: olovedog at FreeDigitalPhotos.net.
P.S. If you’re not yet financially independent, this article might be a bit hard to comprehend. That said, there’s nothing stopping you from starting your journey toward financial independence. Check out some of my resources that are designed to help you get there. In addition, blogging can serve as a great way to get you to financial independence faster, which can also serve as an active income source I described above. Moreover, I’m even offering FREE coaching sessions to those who sign up for hosting using my link. Check out that offer!