News Flash: A High Income Can’t Guarantee Financial Freedom

Remember Illinois Governor Rod Blagojevich? He’s the guy who was impeached in 2009 and then convicted in Federal court a couple of years later on multiple corruption charges, including the solicitation of bribes for political appointments.

Blagojevich’s actions left a lot of people wondering why the ex-governor would ever do such a thing. Here’s the short answer: “Blago” needed the money — even though he and his wife had a combined average household income of almost $350,000 per year at the time!

Incredible, huh?

No household that’s fortunate enough to have an income of $350,000 per year should have a problem making ends meet, especially if it is run by a competent household CEO.

Then again, don’t tell that to the ex-governor; he was recorded making numerous statements about being “strapped” financially — a typical claim from those who live beyond their means.

The lesson to take away from this, of course, is that a high income can’t guarantee financial freedom. Even a six-figure one.

Why? Well, one reason is because the six-figure yearly income benchmark doesn’t have the same cachet it did three or four decades ago. That’s because, over time, inflation has significantly eroded the value of a dollar. For example, a $100,000 salary in 1970 had the equivalent purchasing power of $590,000 in 2014. That’s quite impressive. In fact, I know an ex-governor who would probably jump on that in no time flat.

The second reason is more to the point: Those who are unable — or unwilling — to spend less than they earn are, by default, incapable of ever being financially free.

The good news is financial freedom is a state of mind, as much as it is a state of being.

So while it’s possible to earn $350,000 a year and not be financially free, it’s also true that you can have an annual household income of only $40,000 and be financially free — and the latter example is much more common than you probably think.

Yes, we should always be doing everything we can to increase our income, whether it’s finding a side hustle, or excelling at out primary job to earn bigger raises; but the bottom line is that financial freedom is available to anyone who has enough discipline to make the commitment and hard choices necessary to get there — regardless of income.

Keep that in mind the next time you find yourself saying everything would be better if only you had more money.

Photo Credit: Dazzy D

(This is an updated version of an article originally posted on December 13, 2008)

19 comments to News Flash: A High Income Can’t Guarantee Financial Freedom

  • Erika

    i wish to have Financial Freedom in the next 5 years or so. i was able to establish a small internet retail store last year. i am hoping to gain enough profit from this store.

  • Lesley

    I fall into the latter category. I work 20 hours a week at a little admin job for a local small business, earn $23 an hour, live in a caravan on a rural block of land I bought 20 years ago, drive a 20 year old hatchback, have no debt (haven’t had for decades) and have a lot of time to spend with my dogs, horses, family, reading, hobbies, eat out on weekends in the city, with enough $ for the odd holiday and other indulgence. Free yourself from all the stuff you don’t need anyway and live a life of freedom and happiness!

  • I never get tired of saying this: How much you make is nowhere near as important as how much you save. And yes, I do try to increase my income as much as possible, but no matter how much effort I put into that, I’ll always have more control over my budget.

  • Marcia

    I just finished reading “The Overspent American”. Even though it’s an older book it’s still very relevant. Of course I borrowed it from the library.

    • Len Penzo

      And it will continue to be until the consumerist mentality most Americans have been conditioned to uphold gets turned on its head. And that day will be coming relatively soon, Marcia.

  • Doug

    Sounds like a typical politician. Doesn’t matter how much money/revenue is received, they will overspend. Can’t run a household or business this way, yet, that’s exactly how the goverment runs the country. When interest rates rise, look out, there will be hell to pay.

    • Len Penzo

      You’re right, Fresh One. The US debt is now so large that the country will be essentially bankrupt when it merely has to pay historically average interest rates of 6% (remember those?).

      What’s the 10-year T-bill at now? 3% … and rising! Despite the Fed’s $45 billion per month purchases. Time is running short.

      • Doug

        Yep, once the Fed loses control over the bond market, and the 10 year T-bill rate moves toward that 6% mark (already started)there’s going to be some major corrections in the three asset bubbles that Bernake has created: the stock, bond and real estate markets. About the only thing the Fed does well is create bubbles and this go around (correction) will be a dosy. Furthermore, as you stated, the Government won’t be able to afford the interest payments on their massive debt, so bankruptcy is very likely outcome. I fear the future, because we all know the government won’t do the RIGHT thing (tax reform, entitlement reform, stop spending and balance the budget, etc…)until it’s too late.

  • Daryl

    was free mostly except a condo payment and utilities and insurance, had a paid off Nissan and a chevy pickup free and clear, otherwise no debt, married someone who could not stand the thought of being debt free, got that one fixed, now several years later have a car payment, rent and the usual and a few medical, and i will be debt free again,that little issue of income is in the way right now but working on doing outside stuff to bring more in, goals, pay the current vehicle off withing 2 years and will try for one, the medical not a big deal those are easy, so been there debt free, worked hard at it and got there and will do it again!! just a matter of time again.

  • Great thoughts about living below your means. It’s incredible to me that people that make as much as Blago can blow it all and end up in financial hot water. It’s like these people have absolutely no self control!

  • [...] usually in hock up to their eyeballs no matter how much money they make.I’ve preached that financial freedom can be achieved by anybody, regardless of their income level, more times than I care to count.So what is it that separates the [...]

  • [...] usually in hock up to their eyeballs no matter how much money they make.I’ve preached that financial freedom can be achieved by anybody regardless of their income level more times than I care to count.So what is it that separates the [...]

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  • [...] 6. He never forgets that financial freedom is a state of mind that comes from being debt free. Best of all, it can be attained regardless of your income level. [...]

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