What Financial Independence means to me
Pursuing “financial independence” is in vogue.
More and more of my peers and friends are taking back control of their finances and saying no to the propaganda our culture is bombarded with around debt and materialism.
But I’ve noticed these words mean different things to different people.
At a minimum “financial independence” usually means being 100% debt free (though some of the “money mogul” types defined below will use taking on new debt strategically to build wealth). But what you do with your life, where your income is sourced, etc. differs from financial guru to financial guru.
The Carefree Life
The extreme or ultimate interpretation of this financially-free lifestyle would be never having to have a job again — living entirely off of financial investments. In other words, you reach a level of wealth or standard of living you’re happy with and then put it all on auto-pilot. You can now cruise through life without worrying about where your paycheck comes from.
For the average person to achieve this and “retire” before middle age, requires either some serious luck or serious sacrifice and extreme measures.
The Money Mogul
Other thought leaders talk about, not only getting out of debt, but becoming as filthy rich as you can. Get your own affairs in order, but then work toward establishing passive income streams, acquiring more assets to build your wealth and keep hustling baby!
Some of these folks are OK with taking on mortgages for income properties, etc. (so is that really financial independence?) but the idea here is to never stop building and though you may not clock in, you don’t stop working.
The Working Free (working/or not working on YOUR terms)
I’m too shortsighted to aim for the carefree life — from what I understand, my family and I would have to make massive sacrifices for the next 5 ish years to make that happen, and to be honest, I don’t want to.
Plus, I know some people who have achieved this (through family wealth and/or business and investment success) and after retiring in their 30s and 40s are bored and listless people.
I think life is more meaningful when you have some degree of struggle and there’s a need for your productivity.
Anyway, this is my version of financial independence — what my husband and I are working toward and laying the foundation for.
We will probably continue to work — one or both of us, off and on through the rest of our able-bodies lives. However, we want it to be on our terms.
This is what financial freedom looks like to me:
- Being able to quit your job if you don’t like it
- Being able to work part time
- Taking a year or two off here and there
- Being able to support yourself/your family with a minimum wage job (at least for a few years)
- Saying “yes” to opportunities to travel, volunteer, or start your own business
- Saying “No” to continued job stress
- Freedom to pursue dreams and start new careers
In order to achieve a lifestyle where all of the above are continually available options, I believe you must first:
- Be completely debt free
- Have a substantial emergency savings in place
- Have old-age (retirement) money invested
- Other specific savings depending on personal circumstances (for us that means college money invested for our children).
In my mind, once we achieve the 4 things above — we are financially independent! We can then live out our dreams and exercise the kind of flexibility we want when it comes to income sources.
(( Some of my friends and peers live like the working free, but without having numbers 1 – 4 completed. Do that if you want, but for me the anxiety and stress of not having your future ass covered would be too much. ))
My husband often talks about “time currency,” and says that’s what he is working toward — being able to spend his time the way he wants to. As a major outdoorsman, I know this means being able to pursue long outdoor adventures and trips frequently without worrying about the job back home.
So many people are trapped in jobs and careers they don’t like until they are in their 60s (or later), with their only reward being two weeks off a year. We hear constantly about job-related stress causing health problems and relationship problems, but people are trapped. They don’t have the option to quit and work at Starbucks while taking yoga classes twice a day, because they have payments to make and a high standard of living to maintain.
That’s what we are trying to avoid.
How do you do that? We are still learning ourselves and I’m no expert, but what’s worked for us over the last few years is: save radically now.
