Author Says He Can Fix Your Finances in Less Than Week

There are two important advantages to passive income. First, passive income doesn't take as much effort to maintain. To earn a salary, you typically have to put in forty or more hours of work a week. Maintaining the same amount of passive income takes a fraction of the time.

Second, you can outsource what little time it takes to maintain passive income to somebody else. You can hire a financial advisor to select and monitor your investments, an accountant to monitor your royalty and license fees, and a property management company to collect rent and fill vacancies. This is an advantage that just doesn't exist with earned income.

Can you imagine hiring a temp to take your place at work? Financial independence does not mean that you can't work; it simply gives you the option of working. Most of us want to continue working—our contribution to the world provides a sense of accomplishment and esteem.

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What Financial Independence Doesn't Guarantee

We've all heard the saying, "Money doesn't buy happiness." Well, it's true— money doesn't buy happiness, and financial independence doesn't guarantee happiness, either. Personal income in the United States has almost tripled since 1956, but the number of Americans who claim to be "very happy" hasn't increased—it has remained at about 30 percent year after year.

Income is up, yet the level of happiness is flat. Why? While there are thousands of factors that contribute to happiness or unhappiness, it appears that simply earning more money isn't enough to ensure happiness. Academic research suggests that our current actions are based on predictions of future emotional consequences. Our decision to order a double bacon cheeseburger, compete in a marathon, work late nights and weekends, or purchase a larger house, is based on how we think we will feel once we've accomplished these things.

If we were good predictors of our emotional reactions to these events, this wouldn't be a problem. According to Harvard psychology professor Daniel Gilbert, we do a poor job of determining how we will feel as a result of something—we tend to overestimate the future positive effect of an action and how long we are going to feel good. We think the brand-new car will make us feel much happier and for a longer period than it actually will. In other words, we overestimate those things that we think will make us happy Gilbert's research tells us that whatever we think will make us happy won't make us as happy as much as we estimate or for as long as we estimate.

Does this make financial independence an unworthy goal? Absolutely not. It means that financial independence is a means to an end, a tool. Financial independence alone will not make you happy. It's what you do once you become financially independent that determines your level of happiness.

Most people know what they should want to make them happy. Our brain is powerful beyond comprehension, but it is constantly trying to make things easier for us. As a result, we simplify and streamline what we think will make us happier. We are susceptible to ads that promise excitement and satisfaction without thinking critically about whether the product really will or not. If we did, I would venture to say jeans ads with scantily dressed models (nor even wearing the jeans being advertised!)—just oozing sex appeal—would not be as effective.