What is Financial Independence?

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What is financial independence? Financial independence is when you generate enough passive income that covers your expenses for the rest of your life without needing to work an additional day. It’s when you are independent from any employment and have no need to generate additional income to stay alive.

Whether we like it or not and for better or for worse, money plays a very important part in our lives. It forces us to work for a living so that we can put food on the table and pay rent. There are many variations of financial independence such as CoastFIRE, BaristaFIRE, and the like.

However, true financial independence exists when there is no need to work for the rest of your life. The variations all have some form of work as a requirement. Currently, I am “LeanFIRE”. If I were to quit my job or get fired tomorrow, I can live on a ramen noodle budget for the rest of my life.

However, what I want to reach is the standard form of FIRE. Where the quality of my life doesn’t diminish or change in the slightest bit with excess cash leftover for any margin of error. If you’re wondering what is financial independence, it means you want to break free from the golden shackles of the working world.

That’s how it should be. We are not built to work 40+ hours a week for 40+ years straight. There’s more to life than working for a living. You want to control your own life instead of having someone else control your time. Live on your own terms and break free from someone else’s control.

Money will play a huge and important part in your life. Therefore, why not master it and have you call the shots?

What are the Goals of Financial Independence?

Now that you know the answer to the question of what is financial independence, let’s go over the goals of it. I can attest that one of the goals is to DEMOLISH that social share button and posting to your favorite social media! Personal finance junkies love to spread the word around and I put myself in that bucket as well.

It’s not a good feeling when you realize a company owns your time, effort, and attention. My life has gotten significantly better when I realized I’m not beholden to anyone anymore. Therefore, let’s spread the word and make your friends’ lives better as well.

One day, they will be thankful. So with that said, let’s get into the different goals of reaching financial freedom.

1) Freedom

What is financial independence? Having freedom.
You can finally be free.

This is the number one goal of having enough money. When you have enough money to do anything and whatever that you want, you have the freedom to do anything that you want. You are free to choose how you spend your time because there are no consequences worry about.

You don’t care if your boss is mad that you didn’t finish the report. If they are mad, you can just turn in your two weeks resignation and forget about those things. Having enough money means that you are free from the golden shackles holding down many people today.

Imagine your dream life today. Do you really picture having to work for a company as a part of that dream life? I think not. Your dream life will consist of working on your passions and spending as much time as you want to to perfect that craft. Or maybe relaxing on a beach somewhere.

Whatever they may be, freedom is the number one, absolute biggest goal to reaching financial independence.

2) Quality Health

Financial freedom is not about breaking your back working as hard as you can for your employer whose sole purpose is to maximize profits. It’s about taking care of your health along the way and making sure that you don’t overwork. Health is wealth.

It doesn’t make sense to make an additional $10,000 if it means having to spend $25,000 in medical bills. One of my friends started having neck and back problems from the stresses of his job. Additionally, it doesn’t just mean physical health, it means mental health as well.

When you are financially independent, then there is no need to have added stress into your life, which improves your health. You can decline as many things as you want without caring about what that will mean for your life. People who became financially independent improved their health by leaps and bounds with the lack of stress from a job.

3) Having Options

Financial independence is about having an abundance of options. The option to quit or the option to retire when and where you want to. Or it could be to work. However, it would be work because you want to and not because you have to. Whether I like it or not, the sole reason why I’m working is because I have to.

I have to put food on the table and I have to pay rent to keep a roof over my head. That’s true for millions, if not billions of people across the globe. If you are not dependent on a company for a paycheck, you can skip all of these steps. Every decision that you make will not be financially motivated.

They will be completely motivated without any external forces forcing you to do so. It is all intrinsic. Think about how great your life would be if you can work when, where, and on what you want to. Instead of having to start work between 8am – 9:30am, you would have the option to start whenever.

Doesn’t that sound like the life?

4) Financial Independence Means Living With Enough

Just because you can buy additional things doesn’t mean that you should. Financial independence allows you to live with enough. There’s no need to have excess amount of things or stuff. Which allows you to practice simple living. I could buy another car if I wanted to. I definitely have the financial means to do so.

However, I already have a car that’s a reliable source of transportation to get from point A to point B. There’s no need for me to buy another one because I already have enough to live on. That’s what it means for you as well. Having a lot of money doesn’t mean you spend all of it on your heart’s desires.

It means you set aside a fun money budget but never spend so much that you go above and beyond your typical budget. Money is a constraint that almost everyone deals with. However, when you figure out how to live with just enough to keep you happy, then you can be financially independent.

There’s no need to keep working in the hamster wheel just so you can get that next block of cheese.

5) Pursuing Dreams on Your Own Terms

What is financial independence? Working on your dreams.
Ruthlessly pursue your dreams if you are financially independent.

There’s no way that your passions are to work for another employer helping them be rich beyond their wildest dreams. Your hopes and dreams are much more than that and are much bigger than that. You dreamed and aspired to have much more meaning and purpose in your life than to work for the next paycheck.

The goal of financial independence is to put you in that position to live your dreams in reality. You would be working on passion projects that make you happy completely on your own terms. No one tells you how to pursue those projects, you pursue it the way that you want to pursue it.

I used to have aspirations of being a professional tennis player. However, I started playing tennis way too late at the age of 11. Additionally, I knew about the harsh realities of how much tennis players make. Therefore, I played until high school and a little bit until college. Never pursuing it and going for it full time.

If I had all the money in the world, I would have pursued it just to see how far I would have gone. Missed opportunity to explore that career option even fr=urther.

I’m sure that there’s much more things that you want to do in your free time than to recharge and get ready for the next working day. Once you have enough money, you can do exactly that and follow your dreams.

6) Financial Security

Finally, the last goal of financial independence is to have financial security. It makes you nervous when you don’t know where the money is going to come from to pay your next rent. However, once you know that you can make rent and/or the mortgage regardless if you work a job or not, that’s true security.

It gives you the power to not have to worry about anything else. You can take much more risks when you find out your failures are meaningless. Jeff Bezos tells you to fail as much and as often as you can by saying “Amazon lost billions of dollars and we will continue to lose billions of dollars”.

News flash. Not everyone can afford to lose a billion dollars and scoff at the loss. Not everyone is in that position. However, when you are already secure financially, then you have the power to take more risks. If you fail, who cares? You already have a well established safety net anyway.

What Financial Independence Isn’t

So now that we went over what the financial independence movement looks for, let’s go over what it isn’t about.

1) Financial Independence is Not About Not Working Anymore

Too many people think that once they are financially independent, they should quit work and do nothing. Because well, they have no more need to right? That is incorrect. The movement is NOT about never having more work to do. The movement is about working on your own terms on projects that you want to work on.

If you are financially independent and you find out that you like working for your company, then more power to you. Keep going and don’t put your foot off the pedal. No one is telling you to never work, everyone is telling you to work on things that you want to work on.

There’s a plethora of the internet police who says that if you’re making money, then you’re not “retired”. That’s false. Retirement is not about never making money again. Retirement is about working and earning money because you want to, not because you have to.

Therefore, don’t listen to others telling you to not work after reaching financial independence. If you want to work after achieving it, you should.

2) To be Rich for the Sake of Being Rich

What is financial independence? Not about having more mansions.
Mansions are not what the movement is all about.

Financial independence isn’t about working to acquire as much money as you possibly can. It’s about working to acquire enough money so that you can have freedom and security. There are a lot of folks out there who are rich but don’t know what to do with their lives.

Their lives have no other purpose than to be a cog in the machine and feed the economic success of the country. Therefore, they continue to work at their careers and still chase after the dollars because they don’t know how to do anything else. That’s not what becoming financially independent is about.

To be rich for the sake of being rich means that there’s no purpose and meaning behind your life. There’s no point in chasing after the next dollar if it’s just to pad up additional digits to your bank account. That’s a horrible goal to shoot for.

Figure out where you want to end up at the end of the race. There’s no point in running as hard as you can on the treadmill and standing still until the day is over only to do it all over again tomorrow.

3) Sacrifice and Cut Back Until You’re Unhappy

Too many people mis-understand the financial independence movement. They think, “well, why should I be unhappy by not eating out for five straight years only to be happy afterwards”? That’s not what it’s about. There is a form of extreme financial independence that supports that lifestyle.

However, you should pursue it only if you believe that you can handle that kind of lifestyle. I certainly can’t. I HAVE to eat out every single day because I haven’t cooked in about a year. Financial independence is about going at a pace that you are comfortable with.

With that said, let me give you a secret about money. Lock the doors behind you.

EVERYONE has a chance to live with excess money. Even the ones who are poor. There is no one who works 112 hours per week (168 hours a week minus 56 hours to sleep) without having money leftover at the end of the day. It’s what you do with the excess money that’s going to make the difference in your financial life.

You can certainly spend a portion of the leftover money on fun. However, make sure to bank a few dollars leftover to save and invest for your future as well.

Anyone Can Achieve Financial Independence

The great thing about financial independence is that it is accessible for everyone. Even the ones who are in poverty. Remember that I lived on a near poverty income straight out of college. I lived on approximately $20 – $25k per year. Even then, I STILL had money leftover to save and invest.

By the way, this is even after NOT working more than 50 – 60 hours per week, at a maximum. I still had an additional 20 – 25 hours per week I could devote to a side hustle but deliberately chose not to. The lesson is that anyone can get to a place of financial independence.

It may mean putting in more hours and work more than the next person. However, the idea that it is achievable for everyone still stands. That doesn’t mean that it’s going to be easy but it does mean that it is achievable. It may mean that you have to cut back on expenses or it may mean putting in more hours at work.

Or it may mean picking up a side hustle. Regardless of what you decide to do, just know that it is within reach. Your income is only one side of the equation. If you’re not happy with it, supplement it with more work. Or if you can’t find a way to supplement your income, figure out a way to cut back on expenses.

Remember that a penny saved is not a penny earned. Not only is it easier to cut back on expenses than to make more money, $1 savings is worth more than $1 of earnings, as well, due to taxes. There is a breadth of resources available in personal finance blogs for you to learn how to cut expenses.

Arm yourself with the knowledge and come out ahead.

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6 Replies to “What is Financial Independence?”

  1. Great post! “Once you know that you can make rent and/or the mortgage regardless if you work a job or not, that’s true security” – this resonates so much with me right now.

  2. Great perspective. I think most people have more control over their own situation and finances than they realize. Many just dont put in the proper effort. I attack it from both sides by trying to earn more as well as cut back on unnecessary expenses. You have to be willing to fight the battle and it will pay off over time.

    1. Thank you Arrgo. It certainly does feel like a slow burn at times but it does pay off by the end of it all. There will be many times when you do want to give up (I know I wanted to give up so much) but the key is to keep going.

    1. Freedom is the absolute best. I highly dislike feeling like somebody owns my time and my thoughts. Great summary.

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