Breaking Rules

Nothing is as it should be this year. 2020 will go down in history as one of the worst years for my generations (X / Y – I am right on the brink).

Highest unemployment as far as I can remember across the globe. People are restricted to travel between countries, in some areas even between cities. Foodbanks, charities, and NGOs are stepping up and doing what they can to get people through hard times, even in the richest and most developed nations. Medical supplies are running short, equipment gets scarce. And governments are printing cash for people like there is no tomorrow.

Every weakness of our economic systems has been exposed by now. The mantra of a small government and an unhinged economy has been crushed to pieces. Whether it’s Germany, the US, UK or Thailand: Without government support it would all collapse.

It’s a terrible situation, but we will get through this, as humanity always did. There is light at the end of the tunnel, and I am confident that we will thrive again once this is all over.

And having said that, as bad as it is, it’s also a great lesson and experience for us. Instead of lamenting and complaining, we have right now the opportunity to analyze the situation and to think about how we can handle a similar occurrence in the future. Because we know that this wasn’t the first, and certainly won’t be the last pandemic that we will have to deal with.

Financial independence should grab more spotlight than ever before

The current situation showed lots of weakness in the structure of our society, especially to those who are in the rat race. As the crisis triggered massive unemployment, salary cuts, and put people in danger of losing access to their basic needs like shelter, food, and healthcare, it has never been more obvious that the rules we follow are flawed.

People are talking about jobs, minimum wages, worker protections. Protections from evictions, free medical support, and other measures to help all of us getting through the challenges of the pandemic. And it’s all good and right. We need to work, we need to have our rights protected, and we need a framework of rules to make sure those in power don’t abuse those who are not in a position to protect themselves.

Unfortunately, the same rules that protect us are also the rules that limit our opportunities. They push us into the rat race, into the dependence on people who employ us, and on governments that care for us. We give away some parts of our freedom and receive in return limited protection that helps us to make it through the days ahead.

But those who really want to get at least a slice of their freedom back, they got to break out of the rules and take ownership of their future. It’s especially situations like the current crisi, when financial independence becomes more important than ever.

Being financially independent means that you can afford to have a shelter without relying on the government, that you can put food on the table without relying on charities, and that your health is protected. Financial independence is not about getting rich. It’s about freedom.

The steps for reaching financial independence are only a few:

  • Earning as much as you can
  • Spending as little as possible
  • Saving and investing the surplus
  • Building passive income

Only four steps that explain it all. Simple and while not easy, definitely achievable with the right mind-set, plan and determination. And the benefits are immense. Not only may it allow you to retire early from your regular job. Achieving financial freedom will also empower you to pursue other paths and passions which you might have not considered previously due to financial commitments that couldn’t be neglected.

Even more importantly though, it will also prepare you for hardships, and situations as we are experiencing right now. It’s undeniable that those who build up emergency funds that cover 6-12 months of expenses, or who have passive income streams, are significantly less worried while the virus is causing panic and havoc across the world.

The FIRE movement is just a smart thing to do

When you explain the idea of financial independence and the FIRE movement to people who never thought about it, you will hardly find anyone who would disagree with it these days. There is nothing about massive unemployment, stagnant wages, and deteriorating economic conditions that would encourage people to go back to the old days.

And this is not a one-off event. It will happen again. Maybe it will be another virus. Maybe something else. But we know that hard ships are part of the equation throughout our lives. So wouldn’t it be a smart thing to do something about it? To prepare for it?

As my readers know, I am promoting investing in stocks. And surely, many companies got in trouble and had to cut or reduce their dividends, hence also impacting my passive income. But what this crisis showed me clearly is that while there is no 100% protection in this kind of environment, the odds are still clearly favouring investors over regular workers.

I work in the hardest hit industry of the pandemic: I am a hotel manager. And while my salary was cut by up to 40% as my hotel had to close for a few months, my passive dividend-income went down only by 9% on average year to date so far, and I expect it to remain on that level.

If you ever had doubts whether FIRE is for you, these doubts should be gone by now. And whether you invest in stocks or real estate, or any other way that generates passive income streams, it should be (or become) a part of your plan.

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