Opinion – From Grain to Grain: Living on an income is the last step on the journey to financial independence

Many confuse the relationship between living on income and financial independence. The first situation is only possible when the second is reached, but many believe that they are independent. I explain this confusion and what your focus should be right now.

I recently conducted a survey on which topic most interested in investments. The research had two intentions.

One of the objectives of the survey was to understand the interest in the theme “living on income” in relation to the “Journey to financial independence”. Glad the second won, but it was very close. This result is what I want to demystify. It doesn’t just imply that half are interested in each theme.

At first, it would be possible to argue that there is a great interest in learning to live on income. However, I purposely included a similar third pick that lost badly.

Participants had three themes available to choose from: journey to financial independence, investing in retirement and living on income.

The theme Journey to financial independence won with 48% of the votes, followed by Living on income with 47%. The topic Investing in retirement was passed over with only 5% of the votes.

I understand that there are several objectives within the topic of Investing in Retirement. But the main objective of understanding how to invest in retirement is to live on the income of your financial assets.

Living on income was almost the winner, but it shouldn’t have been. Before explaining this, let’s look at another aspect.

You might say that those who voted for Viver de Income were primarily interested in understanding how to reach this stage.

In this case, they should have voted for the first topic, which was Journey to Financial Independence.

The big question is that many attribute the subject Living on an income to learning how to earn a lot of money. This relationship is an illusion of many. Perhaps this false expectation is influenced by videos on social networks of individuals showing an unsustainable standard of living.

Understand, Living on income is the last stage of the Journey to financial independence.

If you reach your financial independence, it means that your financial assets are already large enough to provide income capable of covering your expenses.

Therefore, trying to learn how to live on income before reaching financial independence is like trying to learn to surf in the sea without first knowing how to swim and living inland, that is, far from the sea. There is always some benefit in studies, but they must have an order.

Obviously, there are people who have already reached financial independence or are close to this goal. For these, understanding how to live on income or how to invest in retirement is interesting.

If this is not your case, your focus should be on building and implementing a plan for your financial independence.

Having a portfolio with a focus on living on an income, before reaching financial independence, may not be the best portfolio to get you to the stage of living on an income. Therefore, starting where many are ending can hinder their development.

Michael Viriato is an investment advisor and founding partner of Investor House.

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Book: The Journey to Financial Independence

summary

Introduction
Understand how you will achieve your financial independence
Living on an income is the last step on the journey to financial independence

Chapter 1 Construction of the plan