It’s not uncommon to witness individuals tirelessly pursuing financial independence only to find themselves trapped in a cycle of stress, worry and anxiety. While the burden of debt may be lifted, new questions emerge:
How big should my emergency fund be?
How much of my income should I invest?
How big should my nest egg be and by when?
In the midst of these worries, the true essence of financial independence often gets lost.
What’s the point of pursuing financial independence if we are constantly trading one type of anxiety for another? As a psychologist, I’ve come to the realization that true financial independence extends far beyond the numbers. The numbers are important, yes. But in my view, true financial freedom comes when we achieve number goals and also embrace the empowering emotional states associated with those numbers.
Same Circumstances, Different Feelings
Most therapists can attest to the observation that the same circumstances can illicit completely different reactions among their clients.
In psychology, Appraisal theory is a framework that suggests that our emotions are not solely determined by external events but are also influenced by our subjective evaluations or appraisals of those events. This is a critical concept to understand when we pursue financial independence.
We often think that setting into motion sensible financial goals will usher the same emotional benefits to everyone. This should be the case, but it is rarely the case in practice.
Cognitive Distortions and Biases
In cognitive therapy, we help clients recognize and combat distortions and biases that sabotage their ability to experience positive emotion or experiencing the world in an objective manner. Cognitive distortions are biased thought patterns or irrational beliefs that can negatively influence one's perception of reality. When individuals solely pursue financial independence through numbers, they can also be susceptible to cognitive distortions that can block feelings of contentment or satisfaction with their accomplishments.
Here are a few cognitive distortions that may hinder contentment despite reaching financial independence:
1. Black and White Thinking: An all or nothing perspective when someone believes they are either completely successful or a complete failure, disregarding the gradual progress made along the way.
2. Overgeneralization: When broad conclusions are made about one’s financial situation based on a single setback or limited evidence, leading to feelings of hopelessness and self-doubt, such as overgeneralizing a temporary market decline or unexpected expense affecting one’s budget.
3. Emotional Reasoning: When individuals rely solely on their emotional state, such as worry, fear, or discontent, to conclude that they are not truly financially independent, even when objective evidence suggests otherwise.
4. Anchoring Bias: Heavily relying on initial information, such as specific monetary milestones, to judge self-worth or emotional state, hindering the experience of empowering emotions unless precise targets are met.
5. Loss Aversion: Strongly preferring to avoid losses over acquiring gains, which can lead to excessive fear and anxiety about losing wealth or dealing with market fluctuations after a goal has been achieved.
6. Social Comparison Bias: Evaluating oneself based on comparisons with others, even after achieving financial independence, resulting in feelings of inadequacy and an inability to fully embrace personal accomplishments.
What Feelings Should We Embrace on the Journey?
Cognitive distortions and biases can block us from embracing the core emotional states associated with achieving financial independence. These include but are not limited to:
1. Freedom: Financial independence allows us to have greater control over their financial choices, lifestyle decisions, and the ability to pursue passions and interests without being constrained by financial limitations. Money serves us, rather than the other way around.
2. Security: Knowing that we have built a solid financial foundation and have the resources to meet our needs and handle unexpected expenses can instill a sense of peace of mind. This feeling of security allows us to focus on other aspects of their lives, pursue their goals, and take calculated risks without constant financial worry.
3. Confidence: Achieving financial independence can boost one's self-confidence and self-esteem. It serves as a tangible validation of one's financial acumen, discipline, and ability to set and achieve goals. This newfound confidence can extend beyond financial matters and positively impact various areas of life, empowering individuals to take on new challenges and pursue their aspirations with a greater sense of self-assurance.
4. Empowerment: Financial independence empowers individuals to make choices that align with their values and priorities. It offers the freedom to design one's life on their own terms, whether that involves pursuing meaningful work, investing in personal growth, giving back to the community, or engaging in activities that bring joy and fulfillment.
5. Peace of Mind: Financial independence can bring a deep sense of peace of mind and overall well-being. It reduces financial anxiety, uncertainty, and dependence on external factors. With financial stability, individuals can focus on maintaining a healthy work-life balance, nurturing relationships, and pursuing personal interests, leading to greater overall life satisfaction and mental well-being.
Conclusion
In a future blog, I will discuss challenge cognitive distortions and biases, and how to fully embrace and claim the feelings associated with financial independence. For now, it is important to recognize that financial independence is not solely defined by reaching specific numerical milestones. It's also learning how to embrace empowering emotions along the way and doing so consistently. When we become overly fixated on the numbers, we risk missing out on the true transformative power of financial independence on our sense of well-being and in our ability to chose a different, healthier path. By actively working to overcome cognitive distortions and biases, and by embracing empowering emotional states, we can fully appreciate and take advantage of the benefits of financial independence and lead lives aligned with our values and aspirations.
Comments