Declaring Economic Independence

We spent the last half of August reconnecting – traveling and visiting relatives throughout the Upper Great Lakes region, and attending my high school reunion. One evening we chatted with our niece (whose online ventures we featured here) about e-commerce, and planning transitions that would meet changing lifestyle objectives. It was during this conversation that I realized Becky, Pete and I had all declared economic independence.

How had we become economically dependent in the first place, I wondered? Like many people, early on I had let life happen to me, sufficiently content with what came along. The message while I was growing up was that you went to school, got a college education, looked for a secure job with benefits, and lived a traditional lifestyle that included marriage, kids, house, two cars and retirement at age 65. This was the very definition of security and stability, and there was little reason to question it.

But Pete and I had traveled virtually parallel paths: divorce and decimation of retirement accounts, career changes that veered into self-employment and business ownership. The previous ideal began to seem more like a bum deal.

It all circles back to stuff: beginning with acquisition when we start spending more than we have, and then servicing the debt we inevitably incur to get more stuff. One of the first things I sought was to be approved for a credit card, and then, a car loan. In the industries I chose and the communities within which I lived, status was conferred in conjunction with material milestones: what you drove, what you wore, where your home was located, and how much money you made. Pretty soon, you’re sharecropping the middle to upper class lifestyle!

Big influences and admonitions when we were starting out are still present today: needing to have it all, requiring more than one income, the only job we should take is the one that comes with full benefits, and that we ought to seriously consider graduate or doctoral degrees in order to get further up the endless ladders we all were climbing. And yet, we still felt poor by comparison. We compete with our peers: “he who dies with the most toys wins.” We emulate others who run the rat race faster, and feel the stinging shame when we don’t keep pace.

In exchanging control for the illusion of stability that came with a paycheck, we enslaved ourselves to a system that would ultimately fail us in a series of spectacular economic implosions. The major reason we are economically dependent is because we believe we have no alternatives. As such, our enslavement tends more toward self-inflicted.

How do we declare our independence from this kind of slavery? Economic independence has its roots in self-reliance, but it’s not as simple as heading west and living off the land. Instead, you must assess your talents and evaluate how they can be utilized. Spread the risk of loss to more acceptable levels by becoming less dependent upon a single income source, like your job. Developing new skills and investigating outlets for those skills is part of the new picture, too.

Prior to the discussion with our niece, we’d visited with other family members.  In that medium-sized group, one had been involuntarily downsized from a lifelong position with an auto manufacturer, another was continuing stressful work because her retirement income depended upon an extra few years, more than one was looking ahead to extreme physical labor or emotionally demanding work, one was a new mother who did not want to return after maternity leave, and one eked out a modest living at a level that qualified her for government assistance.  So much woe!

Each of these individuals could radically change their current circumstances just as we have. Some of them may very well do so, yet others will not. It’s hard to watch this happening to people you care about. It’s even harder to see some of them let it happen.  We know all too well that a prolonged feeling of helplessness or lack of control will lead to inertia and even depression.

If you find yourself on a similar path, what can you do to reverse course? First, simply refuse to be defeated by external circumstances. Take action. Instead of letting what you can’t do define your existence, figure out what you can.

1.     Take personal responsibility and assume control by identifying ways to earn. This doesn’t necessarily mean taking on a second job, although many people do moonlight. Investigate how to sell your knowledge, market your existing skills and abilities, convert unused possessions into cash, acquire items for quick sale at a profit, downsize your footprint and reduce the costs of maintaining your lifestyle, learn a new trade, access knowledge that you can convert into revenue.

2.     Perform due diligence on traditional education. There’s no guarantee these days that a master’s or law degree will bring you an automatic job offer. Is the price for education too great in terms of your return on investment? If you can’t pay for or work your way through school, how long is it going to take you to pay off your student loans?

3.     Brush up on your Internet skills to take advantage of a more global marketplace. Trade the time you spend on Facebook or online games to learn how to sell on eBay or etsy, put together a website, study affiliate marketing, bid on a freelance contract, write and publish an e-book, create a Squidoo lens. Even if the economy sucks where you live, it may not where your Internet buyers come from.

4.     Figure out your end game. Where do you want to be? Some 30-somethings have planned for and executed early retirement by stashing 75% of their income for the first ten or twelve of their earning years. Could you? Others have a side hustle going – they work their day jobs and work additional business ventures during off hours.

5.     Make smarter acquisitions by limiting your choices. This means you don’t have to look at 20 shirts before you buy one. Choose one out of two or three and keep moving. Shopping and comparing takes time. Trust yourself to make appropriate decisions within a more limited scope. The time you spend is just as much of a cost. Do you really need to look at 100 houses before you find the perfect one? Buy used, in good condition, whenever you can.

6.     Rig up a safety net. Get together an emergency fund for the unexpected and budget your expenses. Buy adequate insurance. Reduce debt by paying off the highest interest first. The combination of lower expense and protection against loss that frugality, savings and insurance provide is a far better form of security than any one paycheck.

There’s nothing new in any of this advice.  Yet time and time again, we see people who feel trapped and constrained primarily by their own perception. Even though economic challenges may persist, those who back themselves up using a variety of methods will fare better than those who accept the status quo.

What do you think?

Related articles

• What Our Move to Location Independence is Not (passingthru.com)
• The Consequences of Perpetual Indecision and Uncertainty (passingthru.com)
• Extreme Early Retirement in Practice: How Two People Did It (getrichslowly.org)
• Don McNay: Are You Ready to Jump Into the World of Self-Employment? (huffingtonpost.com)