Why Are We Not Financially Free?

If you have been following me and in this community for awhile, you have probably heard people or even (scammy) ads talk about the terms like financial independence or financial freedom for countless times.

Here is one question that ponders me when I first heard about those terms: if we have to strive for financial freedom in the first place, does it mean that we are not free? What is trapping us?

I mean look around, we are fortunate enough to be born on a peaceful country in this peaceful time and we are free to to do anything we want and to make any decision. Don’t we?

Why then, when it comes to financial, suddenly freedom is something that we have to strive for? Today in this article, I am going to share with you guys, why we are not financially free, and what are trapping us.

Trap #1 The Rat Race

The Rat Race is the first money trap that I am aware of, after reading Rich Dad Poor Dad by Robert Kiyosaki. If you haven’t read it yet, here’s the long story short. 

As we start working, eventually, our income is going to increase. Do you still remember the feeling when we get our first paycheck? I believe most of us, when we suddenly have so much money in our hand, all of us feel a surge in our Buying Power. Who doesn’t? Expensive restaurants now seem cheap, we can finally buy the things that we could not afford, etc. 

We feel our life standard increase in relation to our income level, and so the more money we have, the more buying power we have, and the better our life will become. We thought. (not to mention the more credit the bank will approve us to spend)

But hey, have you ever come across with the thought that, there are days you just are not well or don’t feel like working, but you have to do it anyway, because you need that next paycheck to come in, because you have bills to pay (even worse, debts). This situation, ladies and gentlemen, is the Rat Race. 

Most of us are not aware that we are in this Rat Race, because we see our living standards improve, as long as our next paycheck continues to come or our business continue to bring in revenue.

But the fact is, regardless of our income level, we’re inevitably trapped in the Rat Race. We work, we get paid, we spend as we wish, we pay our bills, we get back to work, and the cycle repeats. The more we earn, the more we spend. To spend more, we just have to earn more, better job, bigger business.

Trap #2 The Bucket Carrier

Most of our work is trading time with money, skilled professionals may receive a bigger paycheck, but it’s the same, our income stops coming in once we stop working. 

First, unless you are a skilled professional or a business owner, most likely your income will not increase in a desirable manner. Have you ever noticed all the uncle aunties working as waiters at kopitiam, or cleaners? In this ever fast changing world, jobs are disappearing fast, so for most of us, we will experience a reduction in earning power one way or another, if we do not grow with it.

Don’t forget that time is passing and our body is aging, what seems easy now may become a difficult task for us in the future. We’ll get tired, we’ll get sick, we’ll get old. When we cannot work like how we used to do, trust me we won’t be paid as much either. 

Even if we do get to improve our earning power over time, it is likely that we will blow all our money out into our wants and get trapped in the rat race. Needs are the basic necessities for us to survive: food, shelter, clothing. Wants are the things we desire, mostly materialistic. Although we have complete control over our wants, many of us just do not exercise the control.

The fact we would like to point out here is that, it is not the quantity of the income we have that matter, but the quality of the income: active or passive income. 

Active income is the money we have to work for it, trading it with our time or skills. It doesn’t matter how much we earn, once we stop working, once we stop showing up, the money stop coming in. 

Passive income is the money that continues to come to us even if we stop working. 

Trap #3 The Sandwich Generation

Even if you are well aware and get your wants under control, there is another trap that you must still give more attention to your finances.

Most financial experts split our expenses into our Needs and Wants. We will add another one here: Obligations.

As we grow along the journey of life, we can keep our wants in check, but our obligations will ultimately increase regardless of what we do. It could be our elders who are unable to retire on their own, it could be our siblings who are still studying and need our help, it could be that we meet the love of our life and we want to start a family, it could be a baby that comes along the way. 

And here, we will see another cycle that many of us are trapped in, the Sandwich Generation.

We have to provide for ourselves, raise our own family, and provide for our elderly parents. This is extremely difficult because our current paycheck when we start working is barely enough, not to mention the student loans, and the living expenses that will only get higher in future. This reality kills off many financial dreams because it just seems impossible to achieve.

But that is the dangerous part of it. If we fail to plan or if we don’t even bother to plan, then someday we will become the parents that cannot afford their own retirement, and our children will have to suffer in this sandwich generation like we did. And the cycle repeats.

Pandemic

Look around, look at ourselves, all of us are in these traps for decades, for generations. Why can’t many of us realise this and do something about it? Because we are comfortable, so long as the next paycheck comes in on time. 

And then COVID-19 arrives and suddenly the entire world and its economy stand still. 

Imagine this quarantine period as your retirement days, your income stops but your expenses continue.

Pandemic and lock down is the best wake up call on how important personal finance is for all of us. 

Your income stops coming but you still got bills to pay anyway? Good, that is how your retirement feels like. 

You are desperate for the stimulus cheque from the government? Good, that is how you gonna feel when you fail to plan for your retirement. 

Pandemic reveals all the traps we’re in and all the cracks in our comfortable bubbles of living paycheck to paycheck, living above our means, etc.

Freedom isn’t secured by filling up on your heart’s desire but by removing your desire. There are two ways to be wealthy: to get everything you want or to want everything you have. Which is easier right here and right now?

In Conclusion

We are not financially free because our expenses are always ongoing and going up.

We are not financially free because we need income to cover our expenses.

We are not financially free because we need to work for that active income to cover our expenses.

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