In times of crisis where stock markets are plummeting, unemployment is skyrocketing, and it seems that the most sophisticated financiers are at a loss the idea of financial independence really hits home. Financial independence has been written about a lot, often related to the FIRE movement with too much focus on being able to retire early, but what I think the authors fail to miss is that being in a place of financial independence is a good way to protect consumers.
Let us utilize an example of a typical American scenario. A family of 4 lives just above pay check to pay check because they have a mortgage, car loans, retirement contributions, and living expenses. Maybe at the end of each month they have about 500 dollars left to save as cash. It will take that family months/years to reach a point of being able to save enough in the event that their incoming cash flow is disrupted during a crisis event and sustain themselves long enough.
In an ideal scenario that family should be able to move to a lower cost of living location to increase their monthly cash flow, to build cash reserves, eliminate liabilities such as car loans or mortgages, or acquire appreciable assets that are not retirement accounts. This is often difficult because lower cost of living locations are often distant from well paying jobs in larger metropolitan areas and would require upwards of a one hour commute in both directions.
Commuting is Killing Us
Commuting is one of the least productive things modern society still enables. Commuting is bad for the environment, bad for human health, increases probability of human death, and requires maintenance of depreciating assets. As I write, Covid-19 is trying to be contained by social distancing and working from home if possible and people have started to commute less. My own coworkers have declared that they are getting more done than ever, are happier, and appreciate not having to drive to work everyday.
I am a scientist and the majority of my coworkers are as well and we often have to be in a lab doing things which is difficult to do from home, but a lot of our jobs are also at our computers. At a minimum after this crisis I hope working from home becomes more accepted for all workers.
If we can reduce the amount of traffic on our roads by 40–60% our society can improve drastically. The people who have to move to lower cost locations and have longer commutes in order to have better incoming cash flow will be able to get to work easier. The people who can work from home 50–70% stop commuting and either relocate to more affordable locations or improve other aspects of their life that was not possible due to time spent commuting. Less cars on the road decreases total green house emissions in the air and our planet becomes better.
Transitioning to Financial Independence Is Possible
If we can get our society to a point where remote work is more acceptable, we have to drive less, we walk and bicycle more, and we are able increase our cash flow as a result our society will become more resilient in the face of pandemics and crisis. Bedroom communities that catered to commuters will become better communities for the residents. More goods and services will become available at a local level. Reliance on cars will decrease. Society could start making the transition to financial independence.
Reducing total household debt will also become possible if we can increase monthly cash flow to people in society. Spreading people out may also reduce demand for highly location dependent real estate and inflated pricing on real estate and childcare could decrease. Inflated pricing on education is a different problem that would likely not be influenced by being able to work from home and gaining financial independence.
My family is not financially independent, but the appeal is there. Worrying about being able to pay liabilities in an uncertain job market and destruction of wealth is stressful. The idea of owning our home and eliminating the biggest line item cost in our budget sounds like a fantasy in times of economic contraction.
In the end we need food, water, and climate controlled shelter. If we (society) can obtain all of these without having to do back breaking labor I think our resilience in the face of pandemics and crisis will be improved. Our society will be happier and stronger. We could be able to do work that we enjoy.
Living by a remote lake or mountain while logging into a conference call with co-workers from Europe and then taking a lunch break out in nature is possible now.
As a society let us figure out how to make that the new normal so we do not end up where we are now in the next crisis, because there is always another crisis.
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