As some of you know, there is a difference between financial independence and financial freedom. Most of us, including myself, mostly focus on achieving financial independence. However, today I would actually like to talk a bit more about financial freedom and the power of the freedom dividend.
But let me start with a brief explanation of the differences, followed by the benefits of a freedom dividend and an explanation of why 1000 Euro per month seems like an ideal number for most of us.
Difference between Financial Independence vs Financial Freedom
Simply put, financial independence is the amount of passive income you need to cover all your expenses. It is a state in which you would never need to work again to cover all of your bills.
Financial freedom, on the other hand, means that you have enough of a financial cushion so that you can start to live the life that you always wanted to live.
Hence, we typically achieve financial freedom way before we are able to achieve financial independence.
Read more: should you pay off debt or invest?
Benefits of a Freedom Dividend
There are a multitude of benefits when you are able to achieve 1.000 Euro a month in passive income. And luckily, some of those benefits are already experienced way before that.
1. You are less dependent on your active income
This is probably the biggest benefit to all of us. Especially if you don’t like your current job or the career you’ve chosen back at University.
Simply put, at this level of passive income, most of us become less dependent on the salary we earn from our work. It gives us more freedom to choose the work we want to do and by that, gain more negotiation power.
It will also be easier to quit your job if you feel that you’re being exploited or if you’re suffering from an abnormal work-life balance.
Last but not least, it gives you the ability to make career changes.
Especially in Europe, you should be able to pay for that study you always wanted to do. Besides that, there’s a high likelihood that you could accept a lower salary in return for the job you always wanted to have.
2. It creates opportunities to start your own business
I can’t even tell you anymore how many of my colleagues over the past 2 decades have been telling me about how much they would like to start their own business.
The sad thing though: almost none of them took the actual step to start their own business.
And the reason is mostly the same: lifestyle inflation!
They got used to their level of income and at that moment it is hard to “give it all up again”. Add kids to the mix and they’re probably locked into that golden chain forever.
But how much difference a 1.000 Euro freedom dividend can make?
On one hand, this is great seed capital to fund the initial costs for a new business (i.e. an online business). Most small business owners require between 2.000 and 5.000 euros to start their home-based franchises.
On the other hand, it allows you to work 1 or 2 days less at your current employer and use that time to acquire new customers.
This 1.000 Euro might just be enough to keep your lifestyle while you start pursuing that dream and start your own business.
Hence, what’s only left is the mindset to start taking action.
3. It should improve mental & physical health
Honestly, we don’t speak enough about this in our community and we probably should!
How many people do you know in your personal circle that are suffering from mental health-related issues, i.e. depression?
Unfortunately, 1 person is already too many!
While some of them are suffering from genetic inheritance causes, others might be suffering from certain negative life experiences and the feeling that they can’t do anything about it.
One of those recognized negative life experiences often mentioned is financial stress.
It’s really hard in nowadays society which is focused a lot on money and keeping up with the Joneses and our Instagram friends.
Hence, it’s very easy to take on some extra debt to fund that beloved far-away holiday or to buy that fancy electrical vehicle. But the reality after that is the difficulty in paying those bills.
Financial stress is real and it often adversely impacts sleep, and self-esteem and it might also increase the level of anxiety.
A 1.000 Euro per month on the other hand can really contribute to removing the feeling of money scarcity, financial insecurity, and generally the stress in someone’s life.
It often also improves relationships with the people around you, because people tend to be in a better mood and more optimistic when interacting with others.
Having said that, there are still many other benefits to mention, but I find these 3 benefits the most impactful if you want to live the life you always wanted to live.
Why 1000 Euro is the ideal level as a Freedom Dividend?
Of course, a Freedom Dividend at 1000 Euro is a bit arbitrary, but on the other side, it isn’t.
Just have a look at the average salary levels across the European Union:
A 1.000 Euro in passive income can already compensate for up to a third of the salaries in most EU countries. In reality, this means that most of us could decide to work 1.5 days a week less if our employer would agree to that.
That’s freedom right there my friends!
At the same time, it covers already the minimum wages in both Group 2 and Group 3 for people living in those countries.
This means that many of you, the readers, should be able to cover your most basic psychological needs, i.e. energy, food, water, shelter, and clothing.
Of course, I would never want to wish ourselves to be in the situation of needing a minimum wage. But it does make all the difference from a psychological point of view knowing that we don’t need to be slaves to anybody and we would still be able to survive.
And if we need to work for a minimum wage, then at least we get a 1.000 Euro per month in passive income on top of that!
Yes, even after the record inflations we’ve seen this year because, in the end, it’s just about the lifestyle we choose.
But to conclude, this is why I think that 1.000 Euro a month can be considered the ideal number as a Freedom Dividend for most Europeans.
Where am I on the journey?
To be honest, I’m not there yet!
On the other hand, I start to slowly feel financially free already. The only debt we have is a small mortgage on our house, we have a pretty stacked emergency fund and I’m pretty close to reaching that 1.000 Euro a month.
Actually, give me another 1.5 years and I think that I will have reached that milestone.
Needless to say, that would be an awesome achievement and I will definitely celebrate it. It would’ve taken me 9 years to get there, but it was worth every Euro cent I saved during those years!
Having said that, I hope you enjoyed this article. It was a bit a different type of an article, but I had a strong need to share my thoughts on this.
Wishing you lots of investing success and a happy new year!
European Dividend Growth Investor
I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.