Many people instinctively think of wealth as a dollar figure in your bank account. Others at least also include all other assets and liabilities. 

But, for the purpose of achieving lasting life satisfaction through personal liberty, accumulated wealth is just one part of the picture.

Completing this picture is the topic of today’s post. 

What is financial resilience?

Simply put, your financial resilience is the number of years your wealth can sustain your current lifestyle.

Specifically, you take all your assets (cash, property, stocks), subtract all your liabilities (loans and other debt), and then divide the total by your total annual living expenses. 

Financial resilience is an excellent quantification of your personal liberty.

If your financial resilience is close to zero, you must do whatever your boss tells you because you cannot afford to lose even a fraction of your income. But as your financial resilience grows, you earn the right to claim gradually increasing amounts of personal liberty. 

The importance of life efficiency

Building financial resilience obviously requires you to earn a reasonable income. But the more important part of financial resilience is actually the ability to derive more happiness from less consumption.

Lower expenses not only leaves more of your income for saving, but also allows your current wealth to sustain your lifestyle for longer. 

This ability to live lightly is nothing other than the incredibly valuable intangible asset of life efficiency discussed last week. Like any good asset, it takes time to build and gives increasing returns over time.  

If you think about it, building your life efficiency is a real no-brainer. 

As we discussed earlier, most people reading this are at the point where added material consumption will bring little or no lasting life satisfaction. In contrast, the personal liberty needed to find and pursue your purpose makes life a whole lot more exciting and inspiring. 

The liberty threshold

So, how many years financial resilience do you need before starting to claim increasing levels of personal liberty?

This liberty threshold depends largely on your accumulated intangible assets. 

If you have accumulated valuable skills and contacts, built several productive habits and healthy environments, and achieved high life efficiency, your liberty threshold can actually be quite low.

But we must be aware that pursuing personal liberty too early and too aggressively can backfire.  

We’ll dissect this important topic in more detail tomorrow…