“Financial Independence” is the holy grail for many of us real estate investors….and it should be! But there’s another level beyond financial independence that’s even better and more valuable: Financial Resilience. In this episode, Jeff explains the difference between Financial Resilience and Financial Independence, and discusses why Financial Resilience is an even more valuable goal to achieve.
Ah, financial independence. Let’s be honest, it’s what a lot of us are seeking and for good reason. And it’s become a very popular term and expression and an idea among real estate investors, but there’s a difference between financial independence and something else something I would call financial resilience. And in this short episode, I want to share with you some thoughts on why I think financial resilience is a greater goal than financial independence. So let’s cue up the theme song. Let’s just jump right into this.
Welcome to Racking Up Rentals, a show about how regular people, those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to. You see, we are people-oriented deal makers, we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.
Thank you for joining me for another episode of racking up rentals. Show notes for this one can be found at thoughtfulre.com/e141 Please do us a big favor by hitting the follow button or the subscribe button in your podcast app. It really helps the platforms know that you are listening and it makes them want to share this show with other Thoughtful Real Estate Entrepreneurs. So thank you for doing that. Onward with today’s episode.
And as I mentioned in the intro, the term financial independence has become very common sort of in the lexicon of a lot of people in our society, but especially real estate investors. People who are seeking financial independence often like the idea of using real estate investing as a vehicle for achieving that sort of state. And so you know, we call it financial independence, we call it FI sometimes, we call it FIRE, Financial Independence Retire Early. But it’s very common in our lexicon and in our consciousness. It’s kind of like the Holy Grail that many of us are working towards.
And so you know, the definition of financial independence, to sort of to simply paraphrase it in my own language here, is when your living expenses are covered with income that you generate every month, that’s not earned income, right? You don’t have to go to work for that income. It comes in kind of “passively” through your various investments, like maybe rental properties or other things along those lines. But I want to offer a slight reframe that I hope will just make you think a little bit like it does for me. And this reframe is that resilience is better than independence.
What is resilience? You know, it is a word I think about a lot. And honestly, about a year or so ago, when I started really digging more into my own why behind everything I do, both in my own life and as you know, the leader of a Thoughtful Real Estate Entrepreneur community, is about my belief that we’re all better off when we are resilient. And I want to help more people become resilient, and I want to continue to become increasingly resilient. So I think about this word a lot.
Just for fun, to make sure that there wasn’t some definition that I was not thinking of correctly, I looked it back up in preparation for recording this episode and came up with a definition that says, you know that basically you’re able to withstand or recover from difficult conditions easily. And that totally aligns with what I think of when I think of resilience. So let’s just talk for a second about the difference between financial independence and financial resilience.
Financial independence is kind of like a destination that you have arrived at. It’s a level that you’ve hit. It’s kind of a status that you have achieved. It’s an achievement in itself. And your financial independence, when you’ve got the numbers to work – and there’s enough income coming in that you don’t have to go out and earn with your own time and energy every day or every week or every month and your expenses are controlled and those two things are aligned so that there’s as much if not more income coming in than expenses going out – you’ve reached it. And then once you’ve reached it, you know of course you’re very interested in maintaining that status. So financial independence is like the state of being of your finances.
But what is financial resilience? Well, if financial independence is a state of being for your finances, I would argue that financial resilience is a state of being for you. It’s not about the status that your money has, it’s about the state that YOU have achieved as a person. And when you’re financially resilient, you’re able to weather a storm, a financial storm or another type of storm.
It’s not necessarily because you just have a huge war chest of money, and you have so much money that you can just afford to lose it all. That’s not what I mean. What I mean, is, you’re able to weather a storm because you are now the kind of person who can recreate the financial independence that you created in the first place. If all heck broke loose, so to speak, and you lost everything, you would be able to achieve it again, because you have the skills and the mindset about how to actually achieve that. So that to me, that makes you more financially resilient, because it’s about you and who you are in your state of ability to be resilient, not just your money, and the math behind the income and expenses that you have achieved.
You might recall in an episode not too long ago, I talked about the fact that the real reward of entrepreneurship is not the money or the status that you achieve, it is the person you become along the way. And I think that idea is extremely connected with what I’m trying to get at here today in this episode – that when you become along the path of entrepreneurship the person capable of achieving entrepreneurship, you become more resilient; you know, deep down, you’ll always be okay because you have the mind and the skills to go out and create the success that you need. You’re not reliant on anybody else. You’re not trying to just play defense, and protect a certain, you know, financial status you’ve achieved. You know, you have the skills to recreate it at any time if you need to.
To me, it feels like financial independence happens on a spreadsheet, it happens in a bank account. Whereas financial resilience happens in your mind, and in your spirit and it’s a reflection of your skills. So my encouragement to you, is, while you pursue financial independence, that’s fantastic. But don’t just build your income and don’t just limit your expenses. In addition, build your skills and your mindset that lead to financial resilience, because financial resilience is like when you’ve achieved financial independence, but you don’t worry about maintaining it. Because you know, if you needed to, you could always do it again, because you are the person capable of that.
That’s it for today’s episode of Racking Up Rentals, maybe a little bit of a different topic, and I hope it has stirred your mind in a certain way to get you thinking about new things in many ways. That’s my entire objective for this whole existence of this podcast, is just to give you different perspectives that maybe get your wheels turning in a new way.
Again, show notes for this episode can be found at www.thoughtfulre.com/e141. Please do us a big favor by hitting the subscribe button in your podcast app or the Follow button or whatever it looks like in your podcast app these days, and rate and review the show. I do see every one of those and I appreciate every one of those.
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Until then, this is Jeff from the Thoughtful Real Estate Entrepreneur signing off. Thanks for listening to Racking Up Rentals where we build long term wealth by being win-win dealmakers. Remember: solve the person to unlock the deal and solve the financing to unlock the profits.