A Job vs Financial Independence: The Simple Truths You Need To Know

A larger percentage of the workforce worldwide works in a JOB for someone else, rather than being self employed. . Most of us work through our education to find that dream job and advance our career towards the next level. The World Bank has some interesting data on this on their site worth looking into. Many will work in a job till retirement but some choose to pursue Financial Independence. So what are the advantages and disadvantages of A Job vs Financial Independence?

Jobs and Society Drivers

A job is the path most of us start our life journey towards and society is well tuned to guide most down this path. When in School and University, you have a variety of careers to study towards, which would lead you to a specific type of job. The whole system is designed to make you are job employable as possible, so you can get into that dream company, climb the corporate ladder and make the big money once you get to the heights you can get to. Employers are also setup to help employees grow and become more valuable to the business and often offer training and career development that helps people get up the ladder over time.

Jobs are often seen as the safe and secure way of approaching life, particularly from a financial point of view. nothing like having a steady salary coming in regularly to pay for the bills and our lifestyles. It also means we don’t have to take on the stress of having to run and grow the business itself, that is usually left to the CEOs and Executives to worry about. We simply go to work, get the job done, take the cheque home and enjoy our lives, no stress or worry!

Striving towards having a professional career such as a doctor, lawyer, engineer or professor are often seen as the best path parents steer their kids towards. It can take several years of education and hard work to get there but the prize is the money and prestige of having such a job. These professions also come with their benefits of social status and recognition that add to the allure of such careers. You would have heard the pride in parents who have had kids just graduate to become a doctor as an example. So social recognition and prestige are also big factors in striving for that high paying job and sticking with it, no matter what.

Schools and Universities are also fully focused on getting you prepared for that first dream job, offering courses that are attractive to employers. They also often have career advisors who will help students try to figure out what kind of career they may be interested in. In previous generations, getting a job without education or a degree was relatively easy. These days, students and parents do their best to get into Universities and degree courses that give them the best advantage of getting that dream job.

The Advent of the Financial Independence Movement

Back in the early and mid 20th century, having a long tenure of working with a company was the primary form of success for most. Companies kept people for most of their lives and rewarded them for being there as long as possible. The thought of retiring early or being financially independent has not featured much in literature from those generations. Financial Independence is a relatively new concept that according to some originated in the early 1990’s

Financial Independence is still in its very early stages as a movement or philosophy and has yet to be tried through a full generation or two. To this day, you are not really going to hear of a parent hoping their kid graduates from University and strives immediately towards financial freedom! Most parents will kick their kids backsides if they come to them after paying hefty fees for School, College and University, saying they want to retire in a few years 🙂 So not many, if any, of us actually start out our careers seeking financial independence or even know what it means.

Driver For The FIRE Movement

I don’t know for sure but I think the Financial Independence Retire Early (FIRE) movement was driven from some long seated frustrations with having stressful jobs that felt like being a rat in the spinning wheel. Many knew they wanted to quit their jobs and retire but usually that activity was deemed to be solely for the rich and famous. Surely you cant retire early if you don’t have millions of dollars??

Well actually, that is what the FIRE movement is about. It showed the common person a way to retire early, without the need to have millions of dollars. It is meant to give the the lower and middle classes of workers an alternative to get out of the rat race and actually live their lives as they wanted to.

The FIRE movement is based on simple mathematical & statistical principles. You save money through your job regularly, invest the savings and when you get to the magic FIRE number, you kiss the boss goodbye! Its actually as simple as that, although the implementation is not as simple and does take several years, if not decades. But the idea is, if you can start early, get your income up, save enough and invest wisely, you could land up working for 10 or 15 years, rather than the 40 to 50 years most work for. Now that is quite an enticing proposition, isn’t it?

Like everything in life though, FIRE has pros and cons to it and needs to be planned and implemented correctly to be able to enjoy it. But there are a plenitude of benefits that can be enjoyed once you are FIRE’d (no pun intended)

Job vs Financial Independence is a comparison you don’t see often but one that should be done.. Each has their own pros and cons as you would imagine. One may suit some more than the other. So here we take a look at all the objective pros and cons and see where we stand with each.

• Steady Income – generally as long as you show up to work and do a reasonable job, you will get paid regularly. You also get paid for holidays and for when you are sick, within a set allocation
• Scope for growth – if you are good at your job or more importantly, good at schmoozing with the right people, you will be able to climb the ladder and get to a higher level. This of course would generally come with a bigger pay cheque and more responsibilities
• Shielded from business risk – generally, you don’t have to worry to much about risks associated with the business. That is the business owners problem. You simply do you job and get paid the salary. Worst case, if the business fails, you can always find another job in another business and carry on. The business owner and shareholders are the ones who will suffer from the business failure, not generally the employee. Sometimes, employees do get caught up in business failures and don’t get paid for some of the time they have worked. But that can be mitigated by getting another job and moving on
• Ability to learn new skills and get trained – many businesses offer employees training and upskilling as part of the perks of the job. This not only helps the business but also helps the employee. The great part is that the employee can then use these new skills or certifications on their next job, hopefully to take a step up

• Exchanging Time For Money – At a job you are basically exchanging time for money. If you are not at the job, generally you wont get paid, apart from your annual and sick holiday entitlements. Its not a passive source of income at all and it relies on your skills and ability to perform the job
• Working 40 or more hours a week – If you have a full time job, you will no doubt be working 40 or more hours per week. Often its on the more than just the 40 hours as there is always work to catch-up on amongst those constant meetings. Lets not forget the time to get to work and back, which sometimes can take up 2 to 4 hours of the day. Travel to work is significant and should really be counted as the time you work. So in reality, if you are working a 40 hour week you have to add on the time it takes to get to work and back. Generally, if you took 1 hour to go and come back, that’s about 10 hours week, on top of the 40 hours of work itself. So 50 hours of a week are gone in the pursuit of money through work. There are of course people who work a lot more than 40 hours. there are also more people now since COVID who work from home, so travel time is not that relevant.
• Work pressures and stress – inevitably, you will experience pressure and stress at work, even if you have a great boss. The nature of work is competitive and deadlines have to be met to stay ahead. You are not only competing with other businesses but also within the business with your colleagues. Companies are constantly trying to get more done with less resources, in shorter timeframes.
• Work Colleagues – Even if your colleagues are fantastic and friendly, they are also there for the same or similar reason to you. To collect money to pay the bill! So if it came down to it, the same colleagues who are nice and friendly, may not be that nice if they were forced to compete for the same job as you. With work colleagues also comes the same social pressures & nuances as with any other social groups. Peer pressure, bullying, aggressive behaviour and a whole lot more can be expected.
• Mental Wellbeing – with the work pressures, the daily grind, peer pressure and other things at work, one’s mental health and well being can take quite a hit. You may not notice it for years and may grow accustomed to feeling unusual but over time it can get to you. I experienced this first hand after over 20 years of being in corporate jobs. I did not realise how the work environment was affecting my wellbeing. I initially shrugged off short bouts of depression and anxiety as just something that happened as and when I was tired. However, over the years this happened more and more often. Nothing had changed as such in my life but the daily grind was getting to me slowly but surely. At one point of my career, going into an office gave me quite a lot of anxiety and I certainly did not look forward to it. The Monday morning blues were very real and obviously affected a lot of people around the world. for it to be called such a thing/. So job environments are not really setup to optimize and maintain a good healthy and balanced mind. Its all about getting the job done, to make the money for the individual and the corporation.
• One Source Of Income– Jobs have traditionally been considered a safe, steady and solid way to make money. Most parents wished for their kids to get a great steady job after their education. Very few parents, if any, would be thrilled if their kids came to them saying they wanted to retire early after finishing their expensive degree, as we discussed in Wealthy Life: Is our view of Work, Money & Wealth flawed? So if jobs are that safe and steady, what happens when you get made redundant or you cannot work due to health reasons? Suddenly, the income from the job stops and it becomes a single point of financial failure. Many have lost their homes, marriages and families triggered by a loss of job.
• Horrible Bosses – I’s usually all butterflies and roses when you get a job after a few interviews. Everyone you meet seems wonderful and helpful, making you think you have landed the perfect job. Fast forward 6 months and more often than not, its not quite as wonderful. Your boss at your workplace plays a major part in the job being great, tolerable or horrible. Even if you are the CEO and think you have all the power, there is always a boss above you (in this case the board or owner). I have had a mixture of average to bad bosses in my working life, with only one or two who could be considered good bosses. Some of you may have had the fortune of having wonderful experiences with bosses, who look after you in the workplace. But what happens when that boss leaves, will the next one be as good? Its always a guessing game and a bit of the luck of the draw. Unless you are a really good schmoozer and talker, its going to be pretty hard to forge great relationships with all bosses. So when you do get that boss from hell, the workplace suddenly becomes unbearable and adds to the general stress. So overall, your boss is another single point of failure for the success of your working life.

• Do What You Want, When You Want – By definition, Financial Independence is not having to exchange time for money. So you can do with your time as you want, rather than use it just in the quest to make money. If you were working a job, you could not just decided in the morning that you wanted to go to the beach for the whole day. You would have to plan it out, as for a day off in advance and hope that your boss allows it. But you were were Financially Independent, you would not have to ask anyone as your time is no linked with making money or to a job or boss.
• Do The Work That You WANT To – as you don’t need to work a job to earn money if you are Financially Independent, if you choose to work, you can do what you want to. If may be voluntary work or it could be a paid job but on your terms. Having the choice is one of the biggest perks of Financial Independence
• Multiple Sources of Income – Investments are the source of income that keep paying for the lifestyle of someone who is financially independent. Also, the key mantra of investment is diversification to spread the risk. So if you follow the basics of investment, you should spread your investments over several investment vehicles/types. This by nature, you would have multiple sources of income. Not all will have this but in theory that would be the best way to go. This means that you are not stuck to one source of income like you would be when you have a job (although you may have investments while you have a job)
• Focus On Overall Mental Wellbeing – Being Financially Independent does not mean you will be completely free of any stress in your life, that is just a pipe dream. Life stress comes from all different parts of life. What you wont have is the daily job or office stresses that many have. So, if you choose to, you can focus on your overall Mental wellbeing as you will have the time to do that.

• Too Much Time, No Life Focus – Although this sounds like a good problem to have, it wont be if you have no focus or aim in life. You can only sit at the beach for that long or watch that many Netflix series before you will get quite bored of life. In Financial Independence, you have to have some focus, some hobbies or something to keep you busy and your mind stimulated
• Effects Of A Market Crash – as your lifestyle is funded by your investments in Financial Independence, you may be vulnerable to market volatility. This is especially true if you are not well diversified or are on a lean FIRE budget/.