Independence relies on interdependence

Independence — to be free of control, influence, or support of others — is an interesting concept. It’s the foundation of our country. It is what we strive for as individuals. Parents raising children dream of the day when their kids are independent and can enjoy all of their newfound freedoms. Similarly, we look forward to the day when we can live with financial independence, free of the pressures of work and/or running a business.

Independence comes in many forms — personal, intellectual, financial, and others. Financial and personal independence go hand in hand. Most of us have enough resources during our working careers to maintain both. Our independence in retirement depends on our health and wellbeing, and how well we have saved and prepared for a life without a steady stream of earned income.

True independence, however, is elusive. If there are other people in your life — whether through family, work, spiritual, or social circles — there are forces outside of your control, such as health, behavioral, economic, and other factors. There’s an interdependency between the factors.  For example, as things impact our personal independence, there may be financial implications and vice versa.

A recent report from the Pew Research Center noted that nearly 79 million adults in the United States, or 31.9% of the adult population, live in a “shared household,” meaning one in which two or more adults not intimately attached live in the same home. The survey cites that 14% of adults living in someone else’s household are a parent of the household head, up from 7% in 1995. The number of adult children living in their mom and/or dad’s home is 47%, down from 52% in 1995.

The study does not provide insights into why more families are in a shared living situation. It is likely that financial wherewithal and independence are driving forces. Health, family, financial, and other considerations likely contributed to the decision. Achieving and defining independence relies on the interdependency of the factors.

Interestingly, according to the study, the only adult group that isn’t more likely than before to live in another adult’s household is those ages 75 and older (10% in both years). However, the baby boomers are just starting to enter that age range. It will be interesting to see how the data shifts in the coming years as retirement savings, among other factors, plays a key role.

For many business owners, retirement savings is the business itself. The majority of wealth is tied up in the business. Retirement savings plans, if they exist at all, are underfunded. Distributions from the business are often only for the payment of income taxes on the company’s income. Cash is kept in the business rather than taking big salaries or discretionary distributions to diversify their investments. The assumption is that when the time comes to convert that paper wealth into cash that the business can be sold. Maybe it can. Maybe it can’t. If it can, is the business attractive enough to deliver a price that is sufficient to maintain financial and personal independence?



In my practice, I see many business owners who believe that the business will provide for them for forever. However, they don’t have a plan to ensure that it does. The value of the business is unknown; worse yet, they don’t know what creates or detracts from the value of the business.

The most significant driver of business value is its operational independence from the owner. Can it grow and flourish without that person? The very thought of achieving this level of sustainability scares the daylights out of many owners because it means sacrificing their own perceived independence. That is, now the owner has to depend on others to get things done at a level they may have not have in the past. Someone else has to drive sales, secure profits, and manage the team.

Without this reliance on others, the business value and the owner’s personal financial independence will be suppressed. If the owner has put the people and systems in place in advance, this reliance should come easy. However, sometimes owners maintain a white-knuckle grip on growth, decision-making, and operations, so when stuff happens, there isn’t time to adjust. It’s an independence trade off.

As we celebrate Independence Day this week, consider what independence means to you in your life — as a citizen, an individual, a business owner, and member of your family. What are you doing to maximize our forefathers’ gift of independence?

Independence relies on interdependence. Let’s make the most out of it.

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