Financial Freedom, or Financial Independence as it’s also called, seems to be all the rage these days. Maybe you’ve seen acronyms like FI or FIRE thrown around, terms like passive income and dividends, and pictures of people living the good life hanging out on the beach sipping margaritas without a care in the world.
That’s all well and good, but it all seems very distant and unrealistic. Something that only “other” people can attain and usually those people started out rich, right?
I don’t know about you, but I’m a very goal oriented person. And when it comes to my goals, I need something tangible and well-defined to strive towards.
So in terms of Financial Freedom, it’s really hard to actually see it as achievable without first defining what the heck it even means in the first place. If you don’t know what it is, how can you work towards it? How would you even know when you’ve finally reached it?
Let’s take a minute to pull together all the characteristics of Financial Freedom so we can start setting some real goals.
Stage 1 of Financial Freedom
The first step in Financial Freedom is being able to support yourself and cover your expenses without having to rely on the following:
- Another person. This could be a spouse, a parent, your children, or anyone else other than yourself. You don’t depend on someone else to fund your lifestyle.
- A location. This is any place that you are tied to for work, for most people an office or physical company location. To be free you want to be able to earn money regardless of where you are in the world.
- A job/boss. This is pretty self explanatory. Financial Freedom means you don’t need to work in a specific position or have someone else telling you what to do in order to cover your expenses.
That’s it. If you can achieve those 3 things, you are Financially Free. Financial Independence isn’t defined by a specific number in your bank account or a certain income. This will look different for everybody.
Does Being a Millionaire Change Anything?
People like to get so caught up in becoming a millionaire or other magical number. But the truth is, getting to a million on paper won’t do much of anything.
Imagine this: You own a home and the value of that house rises to a point where you net worth is one million dollars. At that point, what happens? Does your life really change? Can you do anything with that money?
But imagine you get to a point in life where you now satisfy the 3 requirements for Stage 1 of Financial Freedom: You don’t need a boss, you don’t need to go to work, you can go anywhere you want whenever you want, and you can completely take care of yourself without anybody’s help.
That’s life changing! That is true freedom right there.
Stage 2 of Financial Independence
But wait, there’s more! Once you reach Stage 1, you’ve totally changed your life, and it’s totally fine to stop there. But Stage 1 still relies on you putting in some type of work and being around to manage things and keep them running. You’re still going to have to hustle and do the work.
Stage 2 goes beyond this.
Stage 2 of Financial Freedom means you can cover your expenses without having to rely on the following:
Stage 2 is being able to maintain your income without having to worry about your health, your time, your mind, your knowledge, even if you are alive. No matter what you are doing or what is going on in the world around you, money will still be flowing in.
If you lose your mind, money will still be flowing in. If you develop a chronic illness or become paralyzed, you will still have an income. If you never work again, you will still be earning money. Even after you die, there will still be money coming in for your family or whoever else you choose to support.
That’s true FREEDOM.
So, hopefully this article has started to give you a clearer vision of what Financial Freedom actually is and has inspired you to begin thinking about what that could mean for your own life.
In the future we’ll start to go over what this means as far as your finances and do the really fun stuff which is running some actual numbers and figuring out what it will take for you to reach your own Financial Freedom.