To many, the American dream of financial freedom means a high-paying job, a big house in the suburbs with a white picket fence, and two kids. But what if that's not the ideal vision of financial freedom? What if you want to travel the world, work on your own terms, or simply enjoy life without worrying about money?
The 40-hour workweek consisting of grueling, labor-intensive work created a sense of pride, security, and financial stability for several generations of Americans. From a 1997 bls.gov report titled "How Long is the Workweek," over 67% of Americans in a nonagricultural role worked 40 hours or more between 1976 and 1993.
However, this is no longer the reality for young adults today: the average U.S. non-farm employee works 34.8 hours, a number that may continue to drop as the generational shift in employment occurs. For Gen Y and Gen Z, working a full-time job - one they don't even like - is no longer the golden ticket. The new American dream - the new vision of financial freedom - is one in which you can do what you love and generate passive income to cover necessary costs and live on your own terms.
As a firm believer in entrepreneurship, innovation, and financial freedom, I wanted to write this piece to explore the imminent transition into what I call the life-work balance, formerly prioritized as work-life balance, and how individuals can prepare themselves to live a happier, healthier life - one not ruled by finance and the traditional 9-5 job.
Robert Kiyosaki helped popularize the concept of financial freedom in his book Rich Dad, Poor Dad. It was one of the first books I've read related to financial management and wealth generation. Kiyosaki believes that money should be "used to create more money" and that having money work for you is the key to financial freedom.
It's a concept that resonates with Gen Y and Gen Z, the first set of generations to grow up with the internet. Despite previous characterizations from predecessors, these age groups consist of entrepreneurs, creators, and innovators who are not afraid to take calculated risks to explore a more meaningful life.
According to an Intelligence Group study from 2014, 64% of Millennials said they would rather make $40,000 a year at a job they love than $100,000 a year at a job they think is boring. Today, we see this via "The Great Resignation, "sweeping across the United States workforce. On January 4th, 2022, the Bureau of Labor Statistics had released data revealing that 4.5 million people voluntarily left their positions in November of 2021, surpassing all-time highs. When reviewing various surveys, it becomes evident that there is a new mentality emerging:
The rapid shift towards remote work, predominantly driven by the pandemic, has added a taste of what financial freedom may look like to a new group of people, including time with family and friends, regained hours cut by commuting, and the opportunity to work on their passions during this additional free time.
Alongside remote work, the global economy has seen an initial shift towards the gig economy, where most people maintain several sources of income instead of just one job or career at a time. As a result, the addition of "side hustles" has become commonplace. According to a Zapier study from January 2021, one in three Americans have a side hustle and expected this number to significantly rise, with an estimated 61.1 million people who had planned to start one throughout the year. Another compelling statistic was found in Google's "Year in Search" report, stating that "how to start a business" was searched more than they searched "how to get a job" for the first time in Google's existence.
The changing workforce and a gig economy are a powerful step towards more individuals achieving financial freedom and what it could look like in the future. We see fewer individuals trading their time for money, and instead, they are trading their output through entrepreneurship or expertise for cash or equity.
While speaking with various individuals who have been able to make the shift, several universal themes emerged, including understanding your "why" and spending your time following your passions.
Serial entrepreneur, author, successful rap artist, financial literacy advocate, and father Kevin Davis told me his "priorities include controlling each moment that I can spend with my family. Finances are just the prerequisite that makes the difference between having a life and the ability to truly live one." He continued, "Being financially free gives me the ability to say yes more times than no. It creates choices and options as opposed to being captive to the system of work, eat, sleep, weekend, and repeat. Once you achieve true balance financially, you learn that life is truly not a financial space; it's about love and loving the moments by being present every single second."
These beliefs ring true for many who have financial freedom as a priority. When speaking with financial economist, entrepreneur, real estate investor, and StockFam contributor Sean Khatibi, he offered his perspective of money, stating it's "merely an instrument humans can utilize to achieve happiness. It's not, however, a necessary/essential element. In fact, many might be worse off with a significant amount of money."
He also moved into his "why", which was a shared concept across my exchanges: "For me, it all comes down to what your goal is to do with money. For me, it's the freedom of mind that my family will be fine while I go after what makes me happy in life. I'm an aviation enthusiast, so I like flying (piloting) planes and also flying across the world. Traveling the world is one of those privileges that comes with financial independence. Family is also very crucial for me, so it allows me to pursue adventures and dreams with my wife and kids. A dream that can't be achieved without financial independence."
These two cases are just a drop in the bucket when it comes to the number of individuals who have achieved what many only think is a dream. They are two individuals setting up their lives in a way where they can pursue their passions and create a compelling and engaging lifestyle by creating income strategies that align with their principles.
The concept of financial freedom has become more attainable than ever before. Although it still requires a high degree of motivation and work ethic, the payoffs are much greater now than ever before.
So how are they doing it? What is the path to reaching this new meaning of financial freedom? How can you spend your life relishing time with your family and friends, traveling the world, and avoiding staring work in the face for 8-10 hours of the day?
Many of the pillars that stood at the foundation of this path were present in both conversations with Sean Khatibi and Kevin Davis. First, they have a high level of self-awareness with their values and principles, which directs them towards what makes them truly happy. They also have a clear picture of what they desire from their life—in other words, knowing their "why."
While Kevin Davis says the first steps are to "understand that wealth is in every single man" and "be relentless in pursuit of knowledge and make it a life-long pact," Sean Khatibi says that "the first step is having a plan." He notes he is aware of "many who want to be millionaires just for the sake of it. However, they barely have any clue what their goals and objectives are, let alone a clear pathway to achieve that."
It takes a great deal of self-awareness and an elaborate strategy, but it's possible for everyone. However, in 2022, a simple Google search will provide decades' worth of books, podcasts, financial tools, and other valuable resources to help you achieve the same.
Financial independence is a byproduct of education or financial literacy. To meet the goals and priorities that you have set while building your plan for financial freedom, you need to be knowledgeable in a wide range of areas.
In a 2018 FINRA survey, those between 18 to 34 have the highest levels of financial stress (63%) and anxiety (55%), while two in three families lack an emergency fund. Learning the basics of finance, economics, investing, real estate, and business can help families and individuals make more informed decisions about what's best for their life, relieving such anxieties.
Sean Khatibi agrees that education is a must: "Reading really paved the way to explore ideas and opened up my mind about the world around me. This is the formula that worked for me, but one should look for ways that allow his/her creativity to flourish, and that's how one can achieve financial independence."
Why don't many people pursue their dreams to become financially free? It all comes down to education. Many are taught to go to school to acquire a job that pays well enough, so they don't have to worry about money and save up for a comfortable retirement. They lack the formal education of setting priorities of ridding bad debt, creating emergency funds, and creating a proper budget to spend, save and invest.
However, with the proper financial education and an understanding of how money works, you can break down those walls that keep people trapped in their 9-5 job, looking forward to the time when they'll be financially free.
"Wages cover costs, equity builds freedom" has been my mantra for several years.
As the great co-founder, chairman, and former CEO of AngelList, Naval Ravikant, once said: "Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy."
Yet, while many people spend their days working harder or longer hours to increase their income, few understand the ability to build passive income. However, as an employee collecting wages, the input does not always create a fair output. To gain the financial freedom you desire, you must own equity, a piece of a growing business, which is possible through numerous methods.
Building passive income is one of the main pillars behind reaching financial independence. Once again, the idea is simple: let your money do the work when it comes to earning more money.
Both Khatibi and Davis spoke to me on the power of investing and how it relates to financial independence, a great strategy for creating passive income. Davis stated, "I would also throw out the one income stream mentality and replace it with many streams of income, with the insight that money invested today is worth more in the future, as opposed to saved money that loses value over time due to inflation."
Understanding investment opportunities such as stocks, real estate, crypto, and so on is the first step. Then, learning how to manage these assets can be a little more complex. I've previously written on evaluating assets such as growth stocks, which may be a helpful resource.
Kevin Davis recommends starting by reading books, such as Peter Lynch's, "One Up On Wall Street" or "Learn To Earn" and "Beating The Street," which introduce the basic strategies of one of the greats in investing. As you learn about the opportunities within the stock market, you will see there are several strategies to take. Davis recommends that you "let one book lead you to the next and study every strategy you can" and remain cautious with trading, stating "those who fall in love with trading and the old adage of buy low and sell high, fail to read the fine print that says 95% of traders lose money."
With the power of compound interest, you can kickstart your journey towards financial freedom by starting small today and growing it into something that will take care of itself. It's also why my goal is to assist people in learning about money and investing.
Despite the spotlight of retail investors in 2021 with the spread of meme stocks and a pandemic recovery bull run, a Gallup Study has shown that only 56% of Americans own stocks (a 6% decrease from 2001). This is likely driven by the fear of the 2008 financial crisis. However, after further research, the average investor will find that there will be market declines every couple of years, but a long-term outlook will provide an opportunity for wealth generation.
A balanced portfolio is built on multiple income streams. No one can predict the future with 100 percent certainty. Thus, having diverse sources of income ensures you will be able to handle any sudden changes or problems along the way without it crashing down your entire system designed for financial freedom.
Having your money work for you may be one way to financial freedom. But, what about when you take it a step further? Instead of building income, turn yourself into the source of income.
This is where entrepreneurship comes in. You want to create a business where your output far exceeds your input. Some scalable examples are consulting businesses or businesses selling downloads or online courses - trading money for expertise - not intense hourly labor.
As noted earlier, we are seeing a record number of new entrepreneurs, as Millennials and Generation Z have been exposed to stories of those who have built financial freedom through entrepreneurship. More and more stories are being published daily, so this will likely continue.
Creating a scalable business around your interests and expertise that allows you to create income while also pursuing your passions can be a recipe for financial freedom. Then, you can take advantage of technology, virtual assistants, or adding laborers to help support your growth - a great resource for this is in The Four Hour Work Week by Tim Ferris, another life-work balance advocate.
In the end, financial freedom is not about money - it's about time. The new wave of "time millionaires" is continuing to rise. While contributing to society's growth is essential, so is the value of your time spent on personal happiness and relationships with family and friends.
Although many people claim that money can't buy happiness, the truth is it buys time. This is why so many individuals are working to get out of the rat race. It's why so many individuals choose to get rid of hours of commuting every week by working remotely or shifting their workdays around so they can spend the time doing things they enjoy.
I wanted to close with a formula that Sean Khatibi had shared in our discussion - something that I resonated with:
Financial Freedom = Goal in life (not making money per se) + plan to make money + exploring ideas and the world + mindful of the crowd you associate with + have fun and enjoy the ride.
It's more important than ever to get your priorities in order. That includes knowing what you want and how much it will cost you. Plus, never lose sight of the real purpose of money, which is a social mechanism for exchange. You must prioritize yourself and the ones you love around you if you wish to be financially free.
For years, I've wanted to write about the strategy and benefits of early or part-time retirement. Although I am relatively early in my journey, after a lot of research and experience in multiple scenarios, my conclusion is that a job is just a tool for providing income to live off. If you no longer need to rely on your job as your sole source of income and you find yourself wanting to get out of your 9-5, this perspective will help you make it happen.