Tuesday, September 22, 2015

Financial Purpose of Life

The overall purpose of life is very hard to nail down. However, the financial purpose of life is relatively less harder to nail down. The financial purpose of life can be summed as the quest to transition to a state where one's income is resilient to recession from a state where one's income is exposed to recession.

State of income being resilient to recession means one would have multiple sources of income which is generally steady even if one looses employment. This would mean one has, in a sense, become a capitalist.

The advantage of being a capitalist is that money comes not from spending labor but from investing capital. So a capitalist will get an income without working. In fact, a capitalist will not need to have employment and would rather give others employment. Those who get employment from the capitalist would be at the mercy of the capitalist for their employment.

State of income being exposed to recession means one would have no or few sources of income which may not even be steady if one looses employment. This would mean one is, in a sense, a laborer.

The challenge of being a laborer is that money comes from spending labor. So a laborer will need to be employed to get an income. A laborer will depend upon the mercy of a capitalist for employment.

So one has to save some money from the job one has and invest it wisely to transform it into capital. The capital thus formed should be used to get earnings which can then be re-invested to further grow the capital.

Once the size of the capital grows to an amount which can provide returns that would replace the salary received from the job and some more, one can stop working purely for financial reasons.

The capital amount at which one achieves financial freedom is simply the transition point between the state of being exposed to recession and the state of becoming resilient to recession.

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