When You Have Financial Freedom But…

Beginner Déc 14, 2020

financial freedom

In our previous articles, we examined how true financial freedom means ownership, security, and easy access to your money, and looked at the ways some institutions seemingly offer financial freedom—but instead offer a watered-down version of it. 

In reality, the only way to achieve financial freedom is to be your own bank, by cutting out the middlemen and taking true control over your finances—and hence your destiny. 

The way you go about this generally depends on your personal life circumstances, but whatever the situation, you will need to be using financial assets that give you absolute control over both their security and accessibility. 

For most people, this is either cash money or gold and other precious resources—since these are well-established and widely accessible. But they’re not exactly convenient. 

Here’s how the two measure up:

Cash

We’ve all used cash in our everyday lives. Generally used for everyday purchases, small expenses, and casual payments, cash is accepted practically everywhere and is the most common payment method in many countries.

But while cash certainly offers more convenience than bank deposits and money locked up in investments, just how much financial freedom does it really offer? Let’s weigh up the pros and cons to find out.

Pros

As we previously touched on, accessibility and convenience are critical when it comes to achieving true financial freedom. In many cases, cash offers both of these in equal measure. 

Small amounts of cash is simple to carry around, relatively safe, and widely accepted, and you don’t have to worry about anybody tracking how or when you spend your money. 

Likewise, it’s easily accessible and cheap to use—with no ATM withdrawal fees or transfer fees to pay when spending it. It also offers peace of mind, since you can always be sure of your finances, by simply keeping tabs on how much cash you’ve got.

Cons

But for all the freedom cash offers, it isn’t perfect. After all, it is unlikely you would feel comfortable with walking around with the large sum of cash needed for some purchases, or even keeping a considerable sum of cash in your home (even hidden under the mattress!)

This, because cash can be easily stolen, and it’s practically impossible to trace if it is—meaning it’s gone forever in most cases. This is one of the main reasons individuals turn to banks to take custody of their cash—for the simple fear of losing it. 

Moreover, even if you were content with carrying around enough cash to make large purchases, it could prove challenging in some cases and is simply not convenient in most countries due to the sheer bulk of it. It would also require a feat of superhuman strength in countries like Venezuela, where hyperinflation has hit hard. 

Speaking of inflation, cash suffers from it. As the price of goods tends to go up over time, cash loses its value—a process known as purchasing power decline. This happens to practically all currencies, and most countries currently have inflation rates of more than 1% per year—meaning your stack of cash can buy less and less the longer you hold it.

Gold and other precious metals

Like cash, gold is widely considered to offer holders improved financial freedom, and is arguably the most popular hedge for those looking to protect their net worth even when the economy starts to decline—such as during a recession. 

No doubt you have heard about how X billionaire holds Y percentage of his portfolio in gold, or how people in some countries have turned to gold and other precious metals rather than using their national currency. 

But is gold all it’s cracked up to be? Let’s weigh the pros and cons to find out!

Pros

Unlike cash, gold isn’t issued by the government and can’t have its supply suddenly changed on a whim—since actually finding gold reserves, extracting and refining it, then distributing it isn’t a process that can be simply ramped up since gold is an extremely scarce resource. 

Because of this, gold doesn’t suffer from inflation

Instead, it has actually grown in value over time and has maintained its value far better than most modern currencies. It also has pretty much a universally agreed value, meaning you can take it anywhere, and can usually exchange it for a reasonable price.

Cons

While it’s hard to argue against gold’s merit as a store of value (especially in recent years), the same can’t be said for its usability. 

For one, there are heaps of fees to contend with if you ever plan to sell, trade, or buy gold. You’ll typically need to buy it above spot rates due to brokerage costs, whereas if you’re selling it, you’ll lose a small chunk of your returns due to fees. Not exactly ideal…

Moreover, if you plan to hold it long-term you’ll probably be looking at storage and insurance costs—particularly if you hold a large amount of gold. This again leads to reliance on third-parties, reducing your access and control over your own assets.

There is a better solution

Overall, both cash and gold can be used to give you some degree of financial freedom, but they are more than a little cumbersome when it comes to dealing with significant sums. And both require a host of trade-offs that just aren’t ideal for most people. 

Instead, if true financial freedom is what you’re after, then cryptocurrencies are your best bet. “Why?” you ask. Find out in next week’s article: “Crypto and Financial Freedom”!

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