Financial Independence Is A Myth

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Author: Joseph Reinke, CFA

Since founding FitBUX, we’ve helped more than 14,000 young professionals with their finances.  One of the top goals I hear is to achieve financial independence.

For example, I often hear, “I want to save $1,000,000 so I can be financially independent.”

In my opinion, financial independence is a myth.

In this article I define what financial independence is, why I believe it’s a myth, and why you should strive for financial freedom instead.

Financial Independence Definition

Financial independence as defined by Wikipedia means: Having enough income or wealth sufficient to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others.  Income earned without having to work a job is commonly referred to as passive income.

Why Financial Independence Is A Myth

The key to understanding why financial independence is a myth is to drill down into passive income, wealth, and expenses. I drill into each of those topics below.

You will notice a common theme among each of them.  They are out of your control.

Therefore, in my opinion, if something is out of your control you are by definition dependent on something or someone else and can’t be independent. Let me explain…

Financial Independence and Passive Income

Investments produce income.  The most common forms of passive income are interest, dividends, and rental income.  For example, let’s pretend you have a million dollars and you earn 3% in passive income a year from that million dollars.  That means you will have $30,000 in passive income per year.


Bottom line, interest rates change.  Therefore, you may think that you are going to earn 3% per year on an investment but in reality you may not.

For example, people that retired in the 90s and 2000s may have thought they were going to earn at least 5% on their money simply by having money in the bank.  They thought this because back in the day you could actually get 5% on a savings account.  Even in the 2000s you could get 3% – 5%.

However, a traditional bank account pays about 0.25% on a savings account now days.

In fact, interest rates have been steady decreasing over the past 30 years in the United States and many make a strong argument that they will remain historically low because of our fiscal problems.

Another common way to earn interest is by investing in bonds.  However, bonds can go into default.

Therefore, not only do you not receive interest, you may actually lose your entire investment.  Ironically, mortgages were seen as one of the safest investments for retirees until the 2008 housing crisis.

In short, interest and interest rates are out of your control.  Your ability to collect interest is 100% dependent on others.


Dividends are paid by companies, most commonly from public companies that you own stock in.  Just like interest, there are no guarantees that the amount of dividends will be the same or consistent over time.

Even worse, there are countless examples of companies mishandling money and/or companies not innovating enough and going bankrupt.

Again, the amount of dividends and if dividends will be paid is completely out of your control.

Rental Income

Rental income is out of your control also.  Three instances come to mind whereby you may not receive any income at all.

First one is if you can’t rent your investment property, i.e. its vacant.

The second is when your investment property is rented but the renter is not paying you rent.  This can happen because they don’t want to pay for whatever reason or a law is passed saying they don’t have to pay.  For example, during COVID rent in many locations was suspended, i.e. renters didn’t have to pay the landlord rent.

The last circumstance is related to the 1st but is a double whammy.  Its when you buy a rental property in a “good” location but that location later becomes a “bad” location.  Therefore, not only do you not get rental income, the value of your asset also drops.

For example, a lot of people planned for financial independence by investing in and around Detroit in the 80s and 90s. They didn’t do too well in the 2000s.


Wealth is often viewed as the value of your financial assets.  For most people wealth consists of retirement assets and brokerage accounts that are invested in stocks, bonds, ETFs, and mutual funds.

You don’t control the value of these assets.  When I bring this up, many that believe in financial independence are quick to point out that investments in a passive index fund will go up over time.

However, that always isn’t the case. For example, from July 1999 through March of 2008, and investment in the S&P500 you would’ve earned 0% return on your money.  In fact, for most of that time period your investment would have been negative.

On top of earning nothing, you are “Financially Independent” which means you don’t have to depend on a anyone else for money the rest of your life.  There are countless studies supporting the fact that if you begin taking money out of savings when the stock market goes down, it drastically reduces the amount of time your savings last.

Therefore, to be “independent” you are actually dependent on asset values. Specifically, asset values when you first start drawing money from your wealth to live off of.


This is the most relevant today because of what we are experiencing economically.  Being “Independent” means you can cover expenses the rest of your life from passive income and your wealth.  You can’t control inflation.

Inflation numbers were recently released… 8.5%!  Most people when they are trying to determine if they can be “financially Independent” do so with an expectation of 2% – 3% inflation.  Ooops!

Expenses, just like the income and wealth, are out of your control.  People tend to stress the most about things that are out of their control.  Which is why people that I know that are chasing financial independence are some of the most stressed out people I meet.

Strive For What You Can Control

When you are financially dependent on a job, you most likely are stressed out about one set of items when it comes to money.  In my opinion, financially independent people simply replace one type of stress with another.

That is why I tell people to strive for financial freedom.  You control everything about financial freedom because its all about knowledge, i.e. knowledge about money and the comfort that you get from that.

I have been financially free my entire life.  I’m also by definition financially independent and personally I can careless about independence.  I’ll take financially free anytime over independent.

That is one of the reasons why I started FitBUX.  I wanted to build a financial planning technology centered around AI that helps people obtain the knowledge necessary to become financially free and make money easy to understand.

Making decisions such as investing vs paying off student loans or how much of my paycheck should go where can be stressful when chasing financial independence.  Our technology makes those decisions easy to make and allows you to reduce your money related stress.  That is what your goal should be, REDUCE MONEY RELATED STRESS and go after financial freedom!

By Joseph Reinke, CFA

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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