#2. THE FIRST STEP TOWARDS FINDING FINANCIAL INDEPENDENCE

by in Finances 6 abril 2017

Financial independence is an instrument for personal freedom, a powerful tool that moves obstacles out of the way in the individual search for happiness and which is morally justified doubtlessly.

However, it is necessary to dig a little deeper to find out why it is convenient to increase financial independence on a more specific and practical level. We know the meta-physical reason but it is indispensable to know the material reasons for this need. We are going to list several reasons why we are sure the reader will find are evident and based on common sense. Thus, the important thing is to remember this and be aware of it as the greatest danger of what we consider obvious is its tendency to become invisible.

The future is uncertain

Anyone perusing the advertisement section in a newspaper can immediately check the enormous amount of offers by savants, tarot readers, etc…. The most sophisticated version of guesswork arts are those of economists and stock market analysts. A great amount of their predictions have the same logical consistency as that of traditional fortune -tellers. In both cases, individuals, companies and institutions pay out enormous sums trying to guess the future. This is all due to human ambition of benefiting from the future.

Quiet Investment believes we must take advantage of the opportunities the present has to offer us in order for us to benefit in the future. However, as French poet Paul Valéry said, “the future is not what it used to be.” For this reason we uphold that in order to benefit from an uncertain future the first thing we need to do is protect ourselves from it.

Financial independence contributes to granting the individual something like a lifesaver or a safety net that protects the individual from harm or bad events and unforseen events that can go from the need to change cars all the way to the unfortunate event of suffering some serious disease. In fact, the future is uncertain. It can bring us great happiness but also great tragedies. However, the human being shapes his existence in a prospective way as the primary instinct of living is to survive, to go on living. This is where everything starts.

The government, or more clearly, inflation and taxes

We already have enough with the usual uncertainties of our daily living. However, the government does not share this appreciation and considers that citizens need to be punished even more by means of two basic tools.

The first is inflation created by central banks and which has as its main goal to dilute State debts. This situation is not temporary, but rather chronic. The basic incentive the politician seeks is re-election. This is achieved in modern democracies by means of majority votes. Therefore the governor has an enormous incentive to try to “buy” those votes by means of expansive policies of public expenditure which includes debt. This debt can be diluted by means of inflation. And inflation is created by means of the monopoly of creating cash. Of course, this monopoly belongs to the governor.

The second tool is taxes. Half of our lives can be dedicated to the “solidary” job of contribution to the Public Treasury. As all votes are equal, politicians have discovered that confiscating €10 from an individual and sharing out €9 amongst three individuals, the governor himself keeping a commission of  €1, this supplies election benefits. Three votes against one. Thus the politician spends by nature and the government thus has eternal debts also by nature. These debts can vary in size but are financed with resources that have been nicely swiped from the citizen. For his own good, by the way.

All of the above, obviously, is an enormous simplification and there are many nuances attached to it. However, this does not make it less true. Aside from the debate about wether taxes are necessary or not and up to what percentage inflation has good or bad effects in the economy, the important thing here is to be aware of the fact that taxes and inflation erode our financial health and will be with us until we die. Thus these should be taken into account and one needs to be protected against them. The last thing is to smile.

Protecting yourself

Not all governments nor all politicians are equally incompetent and corrupt. Some are more than others. These sell protection and as we pay taxes and suffer their inflation we must expect something in exchange. What we do not have to expect in any way is for them to fulfil all the things they promise. That will not happen. It never happens. Thus financial protection constitutes an individual responsibility of each one of us as the organism that promises to provide us with present and future well-being making us happy go lucky retirees in reality has very different incentives from those of its loyal and resigned tax payers.

Although governments have inoculated the damaging virus of personal irresponsibility whereby every time a person has a problem, he seeks a solution in politicians instead of developing the healthy hatbit of  fending for himself, from these lines we recommend you to take care of your own financial matters. Do not delegate in government entities what you can do much better on your own . In fact, the governor harms you more than benefits you. Co-exist with it but never trust it. Trust yourself and those that share common goals and targets. Trust those who have the same incentives you have.

Remember

Life is not easy because at times the future holds bitter surprises for us. Protect yourself from them by yourself having a healthy financial life and you will then be able to benefit in a far safer way from the good news that will also be waiting for you for the rest of your life. Also, don´t forget that you will live in an environment of inflation and taxes that will vary a lot during the passing years and always be there. Take the necessary measures to minimize frequent government extortions of your patrimony. In sum, assume the responsibility of building a financial future that is solid for your own benefit and that of people who are important to you because you need to be one hundred percent certain that nobody is going to do this for you.

Take care.

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