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: He needed the money — even though he and his wife had a combined average household income of almost $350,000 per year at the time.
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 nearly $700,000 in 2021. 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 $50,000 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
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.
Len Penzo says
Good for you, Erika! Best of luck on your store. 🙂
David @ VapeHabitat says
Financial freedom is when you pay no taxes lol
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!
Len Penzo says
Well said, Lesley! And good for you! 🙂
The advice is nothing new, been around forever. I’ll admit I didn’t live it for the first 20 years of my working career. The recent financial/housing/employment crisis changed my perspective on everything. Len is correct about WANTING to have financial freedom and DOING what’s necessary to achieve it. After 6 long, arduous years, my wife and I were able to scale back, ensure expenses were less than income, paid everything off, starting paying ourselves first, and now, we’re in the best financial place we’ve ever been during our life together. Is it hard work? You bet. But it is much easier to sleep at night today than when we were suffocating under a mountain of stupid debt. Anyone can do it, regardless of income – so true …. because we don’t make much. In retrospect, we owed 4x’s our gross income – we have paid that off and almost have that amount in savings. This was accomplished without bankruptcy or debt write-offs (personal responsibility). We made our own mess and it was up to us to clean it up. No one can do it for you. Thanks to Len for keeping the message out there, front and center!
Debt BLAG says
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.
Len Penzo says
Great point, DB. Although how much you make does make a difference for those who do know how to save!
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 says
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.
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 says
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.
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.
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!
Joey Muggerigde says
Ronald Read a Vermont gas station attendant/janitor left an estate worth $8M he lived extremely frugally to the extent of using small safety pins to button up his clothes how remarkable! That to me has been my most inspiring story of the year
David @ VapeHabitat says
What I want is to leave $0 when I die. Earn everything myself and spend it as I want and in time.
Adriana @MoneyJourney says
I’ve actually met a couple of CEO’s who are worth millions. They own successful companies, plus a lot of real estate. However, their obsession with wealth is clearly unhealthy! Making a big deal out of pinching pennies when you have a buttload of money stashed away is definitely a sign of them not being financially free. Which is odd, since others are able to live quite well on minimum income.
Len Penzo says
That is odd … which seems to indicate that how we typically handle money and finances is a hard-wired trait.
Ruben apodaca says
I am a 65 year old man with zero savings due to many years of zero discipline.
Len Penzo says
I’m sorry to hear that Ruben … but it’s never too late to start saving. Set aside whatever you can from now on. My grandma managed to save a nice sum of money just by setting a aside a small amount of money on a regular basis from her meager Social Security check. Eventually, she ended up with a very respectable sum saved up.
Chana Liu says
I think the holy grail of financial freedom is having a lot of passive income. This way you will never worry about your financial needs because everything is taken care of your assets. You will have all the your time in the world and visit all places you dream about. You have your time and money. This is the dream of most people, although only a few have ever achieved it.
A significant issue for 6 figure households, where the income is all earned income, is that they have huge fed and state tax bills. They have little ability to shelter their income as compared to someone who makes the same income in real estate, a small business, etc. Hence, someone earning much less can have an equivalent or better lifestyle (net income). Why the local plumber may have a smile on his face while the neighboring doctor/lawyer power couple head out to yet another 12 hour workday…. It’s not how much you make – but how much you keep.
I made savings a priority. If I had not, I’d be working until I died. I had to retire earlier than planned because of health issues but I want for nothing.
I still live below my means, and save where I can.
I’ve made a game out of it. I had 25 no spend days for April. I was hoping to have 27 no spend days for May but it looks like it’ll be 26.
Lee J Kelly says
“No-spend days”? What a great concept – I’ve never heard of that. I’m going to try it! Thanks!
Karen Kinnane says
My business is selling used / recycled goods. The majority of my customers are foreigners who appear to be much better with money than many Americans. This IS anecdotal but it’s what I see year in, year out. Need something? The average American immediately heads off to the mall or Amazon to buy SHINY NEW. Thrifty Americans and a huge segment of our foreign born population ask their friends for the needed item first, then head to the yard sale, garage sale, flea market, thrift shop, Goodwill, Salvation Army, Facebook Marketplace, Craigslist, Freecycle, ebay and buy the same thing for pennies on the dollar. Many Americans have been programmed to buy new when recycled / preowned is just as good, better made if it’s older, cheaper, better for the environment, better for America’s balance of trade as the money goes to someone living in The U.S.A. instead of our enemies in communist China. The figure bandied about is something like 2-4 in ten Americans can’t come up with $400. cash in an emergency which is sheer stupidity or laziness upon their part. Need new clothing for the children or yourself? Head out to yard sales in well off neighborhoods and score beautiful all wool sweaters, cotton shirts, coats, hats, gloves and on and on for pennies on the dollar, clean, made by expensive manufacturers and barely or never worn. Need tools to start a garden? Paint your house? Do some mechanical or carpentry work? BUY PREOWNED. Same thing with children’s toys, books, cook books, decorator accessories. Put the difference between what new costs and what you spent for used items in the bank. Have stuff you don’t need? YOU sell it on FBM, Craigslist or at a yard sale and bank the cash.
Trying to remain financially free, and save money is helping my waistline. It’s slow going but so is building wealth. 😉
Great job peeps. Keep up the good work.