Financial freedom is about how you spend your time, with the ultimate goal to wake up every morning and spend your day as you choose. It is not about what you choose; it’s about the freedom to choose. The term is often used interchangeably with financial independence or early retirement, but not here—because the common notion of retirement relegates this to late in life, to old age, tired bones—and it’s often “a long time from now”. Instead, this website shares ideas to help you to make your life richer—much earlier—and to celebrate financial freedom at every stage of your life. We find it helpful to define financial freedom as the recognition and conscious pursuit of both financial independence and maximum fulfillment.
Financial Independence is defined as having an income sufficient for your basic needs and comforts for the rest of your life from sources other than paid employment.When you are financially independent, you work because you want to, not because you have to.
To some, financial freedom means being out of debt. To others: having the cash to buy what they want. For some it means opening the bills without dread. And for others it is the ability to ignore the daily volatility of the stock market—knowing they have invested appropriately. Whatever your definition, it means you are in command of your money and not the other way around.
Financial freedom is being in command in an intelligent, thoughtful, and knowledgeable way—the feeling of being free of the guilt, resentment, envy, frustration and despair you have felt about money issues. This happens when you align your pursuit of income with your pursuit of happiness and can happen at any age, but it is difficult in our culture of effective advertising and over-consumption. It requires that you understand:
- your time (or, life energy) you are trading for your wages
- your true sources of fulfillment
- your personal plan to save enough money
- basic financial literacy and common sense investing principles
You can enjoy the peace of financial freedom even while you are still financially dependent on your job if you have chosen a path that leads to financial independence.
Jacob is a CFP® who observes on his blog:
People often view financial freedom as an enormous task that requires years of saving and investing. That’s usually true, but it’s much more wise to focus on each victory along the way. For example, most people could pay off all non-mortgage debt, and accumulate enough assets to buy temporary freedom to find another job or career that they might enjoy. Those are huge steps in the right direction that should be celebrated.
A sense of financial freedom comes from knowing you are on the right path. Milestones along the way might include these:
- Recognizing the advantages of learning valuable new skills—from routine home repairs to higher paying careers
- Eliminating credit card debt
- Eliminating auto debt
- Paying yourself first (automatic deposit from every paycheck)
- Achieving enough savings to withstand economic downturns
- Knowing what is enough money and material goods to keep you at the peak of fulfillment — and what is just excess and clutter.
- Paying student loan debt
- Recognizing that you trade your time (life energy) for money
- Paying off mortgage early
- Understanding how your allocation to stocks and bonds controls investment risk
- Diversifying your investments at the lowest possible cost
- Eventually, only working part-time if you choose
- And ultimately, achieving [your number] on [your Financial Independence Date].
I’ve always been most inspired by the idea of waking up every morning free to spend my time as I choose. Some would call this a full-fledged ‘early retirement’ that makes it possible to devote yourself full-time to whatever is most meaningful to you. That’s the ultimate goal, but it is helpful to learn how to get on a path that leads to this, and to celebrate every milestone along the way.
What does it mean to be Financially Independent?
This doesn’t mean you must stop working for money.
It simply means you can stop working for money.
Having to work to support the lifestyle you choose is form of enslavement that creeps up on many of us. It’s a consequence of our consumption-oriented society. Just think of how many advertisements you are exposed to during a single television program! We tell ourselves that we are in control of our choices, our consumption, our careers. But are we?
Ask yourself this: How would you spend your time if you didn’t have to work for money?
One goal of FinancingLife.org is to help you see that your time, or life energy, is more important to you than money. I like the term life energy because it’s easy to see how we each have a finite quantity. Money allows you the freedom to spend your time as you choose. Recognizing it as life energy helps us to treat money is dear since we trade one for the other.
Learn more about achieving financial freedom in this section of my website:
The Your Money or Your Life program for simple living and financial independence is all about aligning your spending with your life purpose. It moves us away from over-consumption toward a sustainable future for our world. I particularly like that this approach is non-judgmental. It forces you to think and then align your money and energy on those things that bring you maximum fulfillment.
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