Financial freedom: The elegance of simplicity

As I explore more of the ways to live my life to attain financial freedom, I start to see the convergence between financial freedom and simplicity.

The models and approaches that I explore become simpler as I journey towards financial freedom. It is this very elegance of simplicity that draws me closer and closer to the heart of what it means to work towards financial freedom.

Financial freedom in a nutshell

Fundamentally, the concept is straightforward. In order to be financially free, you should build up enough investments that generate passive income that meets your living expenses.

To achieve this level of investments, you generally need to live within your means, save and invest and grow your means.
Your achievement of financial freedom depends on how you manage to work these three areas of your life.

Living within your means

On a superficial level, this just means to spend less than your income. You want to do this so that you can grow your savings that can then be channelled into productive investments to grow your passive income.

On a deeper level, living within your means is strongly correlated with the themes of frugality, simplicity and having an uncluttered life. Many of the problems of financial recklessness and abandon are associated with the mindless pursuit of accumulating material posssessions. Your needs are few but your wants are many. It is the translation of these wants in to ever-increasing perceived “needs” that move us towards the unfulfilling vortex of materialism and the collection of stuff in our lives.

If you look around your room, your home or your workplace, most of the stuff can be done away with. We can do more with less and perhaps even more effectively without the stuff hindering our lives.

Saving and investing

The more you focus on reducing materialism to make you happy, you will find that your real needs are few and differentiating between wants and needs becomes easier over time. Savings becomes easier over time as you delay or defer gratification by spending less and investing more from your savings.

Investing requires effort but the approach for a long-term investor does not have to be overly complex. The main principle is to understand what you invest in and invest in what you understand. To have more investment opportunities is to understand more about different asset classes and the risk-reward trade-offs inherent in each type.

There is no magic bullet. Investing in the long-term can be boring and tests your patience. But slow and steady in investments you understand yielding adequate returns for your appetitite for risk is the way to go.

Growing your means

Does living a simple life mean living hand-to-mouth and suffering privations without enjoying life. The answer is an absolute “NO”. You can grow your means by gaining that promotion, increment or bonus if you are working at a job. If you are running a business, you can expand your business, build it up more with more sales or billable services generated. Growing your means allows you to have a higher standard of living through your purchasing power whilst still allowing you to live within your expanded means.

panzer’s experience

My experience has been that my life whilst simple by most standards can be made even simpler by reducing the amount of STUFF I have in my life. I think I can eliminate at least 50% of the stuff I have now in my home without seriously affecting my quality of life. This has allowed me to focus on savings and to channel these into investments for the longer term.

The more I think about financial freedom and work at it, the more I believe that the principles should be kept simple, and to allow our execution to vary according to different stages of our lives whilst keeping the overall goal in sight, i.e. to be financially free by age xx with a investment capital of $xxx,xxx amount.

Be well and prosper.