I’ve written more than 1,000 articles and a best-selling book over the years, with most of this content focusing on how one goes about saving and investing their way to financial freedom in real-time.
Over the last six years, I’ve covered dividend growth investing as a strategy, frugality, and individual stock analyses with gusto. And much of the focus was on money because, let’s face it, we need money to pay our bills. Well, if we’re not working for that money, we need to come up with the income in some other way.
Enter passive income.
Learning about and creating passive income became a huge passion and pursuit of mine, and I’ve been all too happy to share what I’ve learned and done with the world.
However, you’ll also notice that I’m writing a lot less about stocks and money in general these days, focusing far more on happiness and purpose.
In fact, I spend very little time at all on a daily basis thinking or reading about stocks, money, or even passive income. Most of the time I spend reading, writing, or thinking about stocks and money is related to my freelance writing activity. I certainly enjoy this aspect of my life, but it’s just not the end-all and be-all for me. I don’t wake up every day, immediately thinking about stocks and money.
Passive Income Is Just A Means To An End
This might sound sacrilegious to a number of investors/entrepreneurs out there who view the accumulation of more money as an all-encompassing lifestyle choice that’s automatic – like it’s in their DNA to accumulate, even if they have more than enough.
But passive income, and money in general, is just a means to an end for me. Money is most certainly not the end itself.
For me, the passive income my Full-Time Fund generates simply allows me to live life on my terms. It frees me from most normal day-to-day worries. I no longer have a concern in the world about rent being paid or food ending up in the refrigerator.
So the “end” is freedom. I’m only interested in creating a life that’s customized to my own needs and desires. I’m after the flexibility and freedom that I first need in order to do what I want, when I want, with whom I want. I’m pursuing happiness with every ounce of my being, trying at every turn to become a better version of myself. And through that self-improvement, I put myself in a great position to also make the world a better place.
The money is only the means toward that end. That’s it. Once that end is reached, the money means almost nothing.
In fact, if I could list the passive income I collect as units of time rather than units of money, I’d do that. And that’s kind of what I try to do when I show my passive income against the core personal expenses – I’m basically just showing that my time is freed up from what would otherwise be spent to accumulate the income needed to pay those expenses.
Once you have the money side of life figured out, it’s really time to move on to bigger and better things. And that’s what this site (and life itself) is all about. One should aim to become a better version of themselves… every single day. Every day is an opportunity to grow, learn, and become more.
I think Charlie Munger really summed up my thoughts on this:
If all you succeed in doing in life is getting rich by buying little pieces of paper, it’s a failed life. Life is more than being shrewd in wealth accumulation.
Money Means Almost Nothing Once Your Basic Needs Are Covered
To further the point, we’re going to take a look at Maslow’s hierarchy of needs, which is a theory in psychology proposed by Abraham Maslow. It’s designed to provide a fundamental high-level look at various needs and how they impact psychological well-being.
Taking a look at Maslow’s hierarchy of needs, you can see that the basic needs down at the bottom cover a lot of ground, making up a substantial part of one’s psychological well-being. (I’m using the original five-stage model here.)
The bottom two stages relate to physiological needs and safety needs.
So you have shelter, food, water, and rest at the very bottom. Then security and safety one step up from that.
Without food and water, you’ll die. These are absolutely necessary.
Without security and safety, you’ll also likely die. These are almost as necessary.
By the way, it’s not lost on me that this pyramid is shaped much like a mountain – a mountain not unlike how I view that which has to be climbed to become financially free.
But a lot of what we think of when we think of bills that have to be covered via passive income (in order to become financially free) are pretty much all found in these bottom two stages of the pyramid. We’re talking about rent, food, and transportation for the most part, since these account for most of our expenditures and are necessary to one’s livelihood.
However, the next three stages, love and belonging, esteem, and self-actualization, are only entered into once those basic needs are covered, yet these upper stages don’t really require much money, if any, to experience and transcend.
Well, much like getting past the first leg of a climb is the simplest part, covering your rent and food is also simple. Simple in terms of knowing what you need to do, at least.
Similarly, just like the last 1/3 of a climb is the hardest part, the hard parts of life are figuring out how to love and be loved, set big goals and accomplish them, and realize the full potential of one’s self in all aspects (physical, mental, emotional, etc.).
More importantly, few of these needs, or stages, require much money at all. It doesn’t take money to love and accept love. It doesn’t take money to care about the world around you. It doesn’t take money to read and soak knowledge up. If it takes money to seek out new experiences, it shouldn’t take much.
Personal development and growth really shouldn’t cost much money, yet it all has a significant impact on your happiness from a psychological well-being standpoint.
Moreover, financial freedom is a massive personal achievement that improves one’s esteem, furthering one’s psychological well-being. So financial freedom not only allows you to transcend these initial stages so as to focus on bigger stuff but it’s also in and of itself a major part of one stage.
Life, in my view, is far more about the top three stages than it is the bottom two stages with the amount of abundance and money we have access to in this day and age. It just doesn’t cost much money to put a roof over your head or food in your belly, which is quite different compared to how life used to be 100 years ago. Furthermore, it costs even less to become a better version of yourself through the phases of love and belonging, esteem, and self-actualization.
Thus, money is just a means to an end whereby that end is being in a position where more of your time and energy are spent on pursuing happiness, accomplishments, relationships, and the realization of one’s best. That’s because once you have the basic needs covered, you have far more resources to devote to these endeavors.
This all ties into the marginal utility of money. Going from living on the street to living in a 1,000-square-foot apartment is going to have a dramatic impact on your happiness and survival – and it’s definitely worth the extra $1,000 (or whatever) you’re going to spend per month. But doubling your apartment size to 2,000 square feet and your rent to $2,000 per month won’t have the same positive impact on your psychological well-being.
Although the increase in money spent is the same in both examples (in absolute terms), the increase in happiness isn’t. You can scale the example up as much as you want, but you’ll eventually find that your shelter starts to cause unhappiness. Unfortunately, many people like to spend far too much time, money, and attention in these bottom two stages (bigger home, nicer car, fancier food), when these two stages are simply there to secure your existence and get you set up for what’s yet ahead.
If the pursuit of happiness is an inalienable right in life, it’s in one’s best interest to pursue it in a manner that maximizes the odds of success. Well, I believe most of the value that one will realize in that pursuit is located higher up on Maslow’s hierarchy of needs, which is, coincidentally, where money is not nearly as necessary. (I’m assuming you have electricity and housing if you’re reading this article.)
That means you’ll get the most out of the least. Precisely when you should be experiencing the greatest impact on your happiness is also when you’ll be spending the least money, relative to what’s already been spent to go from $0 to shelter and food.
Keep in mind, though, that Maslow’s hierarchy of needs is not a one-size-fits-all solution. What love, esteem, and self-realization looks like to you may very well be different than what it looks like to me or anyone else. But the great thing about financial freedom is that it allows you to customize your life in a way that maximizes your happiness and psychological well-being.
I personally enjoy reading. So I spend upwards of five hours per day reading about… well, pretty much everything. This improves my mental state.
I enjoy exercising, which improves my physical state.
I also have more time than ever to love and receive love from friends, family, my significant other, and our dogs alike.
And I delight in taking walks, being out in the world, experiencing urbanity, parks, and beaches.
I also spend a great deal of time writing (while listening to music), and it’s an aim of mine to always be a better writer. Meanwhile, the content I produce hopefully inspires others, which improves my psychological state. Inspiring others is also a form of transcendence (part of the eight-stage model created later) – helping others realize self-actualization. And I suspect the last 1/3 of my life will be devoted almost exclusively to philanthropy, which further caters to the need for transcendence.
You’ll notice that none of this costs very much money, but all of it requires time and energy. This is why financial freedom is just one aspect of a holistic lifestyle where every piece complements every other piece.
Of course, I enjoy live music, theater, movies, and visiting the occasional restaurant. So not everything is nearly free. But my everyday life is much of the above – and I’m very, very satisfied. If I weren’t, I would live differently.
What you do, however, to improve your various states is completely up to you. And that’s really part of the fun!
People often focus too much on money. I was guilty of this myself once upon a time.
But I think it’s important to realize that money is nothing more than a tool. If you let money control and consume you, you become the tool.
Money in general (and passive income specifically) simply allows you to focus less on the basic needs in life and more on the higher-level needs that will actually have a meaningful and long-lasting psychological effect on your personal development and overall well-being once you have a roof over your head and food in your belly.
Shawn Achor believes the ancient Greeks best defined happiness thousands of years ago:
Happiness is the joy you feel striving toward your potential.
If that’s what happiness is, we’re surely not going to find it in a thing. It’s instead within us.
But we first must have the tools necessary to strive toward that potential. We must have the time, energy, creativity, and passion.
Well, passive income is a means toward that end but not the end itself. In fact, passive income is really just the beginning!
Do you believe passive income is just a means toward an end, or is money the end itself? Is the true value in terms of psychological happiness and overall well-being to be found in higher phases in Maslow’s hierarchy of needs, where far less money is necessary?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
Maslow’s hierarchy of needs pyramid: By J. Finkelstein (I created this work using Inkscape.) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], via Wikimedia Commons.