What is Financial Independence?

What is Financial Independence?

I like to put beach pictures all over my blogs…

What is Financial Independence? Β This might be something that you are wondering. Different people have different meanings for this. For example, if you are younger, it might just mean financial independence from your parents, in which you start paying things on your own.

However, for me (and for most of the personal finance world), financial independence is the point where I can choose whether or not I want to work, and therefore be able to work on things that I enjoy. I don’t want to feel like I am stuck forever, and having the choice to do what I want to do is important.

The definition from Wikipedia for financial independence:

“the state of having sufficient personal wealth to live, without having to work actively for basic necessities.”

In order to be financially independent, it means that your assets must generate more income than your expenses. So, if you live a pretty frugal lifestyle of lets say $2,000 per month of expenses (food, housing, car, fun, insurance, etc.), then you would want to generate at least this or above in order to live off of passive income. However, if your monthly expenses are much higher and total maybe $7,000 a month, you will need personal finances of at least that in order to be considered financially independent. $7,000 per month would be much more harder to achieve than $2,000 per month.

One thing that will be different on this blog is that I never see myself not working. I always want to do something to take up my time, so I more just want the option to choose what I want to do in life. Maybe one day I will want to pick up and travel for years at a time. When we eventually have children, I would like to be able to spend lots of time with them. The list goes on and on.

Or maybe if I ever want to jump into something completely new that may not make me a whole bunch of money. I want to be diversified so that I can be ready for anything that life throws at me.

I want to be able to pursue work that I love in life, and not feel like I need to sit in an office all day and hate my life.

Financial independence to me is having the CHOICE to do what I want.

Is financial independence one of your goals? How are you diversified?


Comments

What is Financial Independence? — 50 Comments

  1. Hi Michelle,

    Congrats on the new site! I will make sure to follow this one as well. Great to see pictures of the beach. I live in south florida but sometimes the pictures are all you can get when its raining all day.

    For this year is all about financial independence and being outstanding at everything going forward. I am not making money online yet but I plan to add that to my stocks, off line business, and soon some real estate. I want to have income coming from 5-10 different sources.

    • Thanks Thomas! And the picture in this post is from a trip a couple of years ago in Miami!

      5-10 sources would be AWESOME πŸ™‚

  2. “…I never see myself not working…I more just want the option to choose what I want to do in life.” I agree completely with this Michelle. It seems to me this is the essence of financial independence – having the freedom to make the choices you want. It doesn’t necessarily mean you stop working altogether. I think many get that confused. Congrats on the new site…I look forward to reading more.

  3. Pingback: I Started a New Blog and $1,258 in Extra Income | Making Sense Of Cents

  4. I can’t wait to see what you do with this blog. I am always looking for financial independence and am working my way there. Diversification is key and that is why I do so much outside of work to make sure I have an income stream that is from multiple sources.

  5. First off, love the new site!

    Secondly, I fully agree with you that I don’t think I’ll ever stop working. When I become finacially independent (which will probably be somewhere between the two examples you gave above), I plan to only work on things that I absolutely love. It may be becoming a hunting or fishing guide or it may be working with animals in some capacity. At that point the salary I would be getting wouldn’t really matter, so I could just do what I love. I think that sounds amazing and hopefully it happens sooner rather than later.

  6. Support for the new site! Nice work! And as always, financial independence is a good topic on any blog to discuss. If you get enough of these sites going at once and keep them profitable, you’ll be at FI in no time!

  7. Awesome new blog Miss πŸ˜€ The focus on finances is great and I like your definition of what financial independence means to you. I also have this goal and plan to get there by the time I’m 35, or in 9 more years from now. A big part of how I plan to get there is through diversified investing πŸ˜€ Do you have a specific timeline in mind to reach financial freedom or maybe it’s all about the journey and there is no measurable way to define it πŸ˜€

  8. Congrats on the new site! Financial independence is all about choices you don’t have when you are working to pay off debt. It doesn’t mean not working, but I bet financially secure people enjoy work more because working or not is one of those choices you get to make.

  9. YES, financial independence is one of our goals. First, we are working to eliminate all debt. Then, we’ll work towards passive income sources like dividend paying stocks, maybe some real estate stuff too. We’ll see.

  10. I’m really excited for this site and the potential of what it can become. I am similar in that I want to have the ability to choose what work I want to do. If commuting an hour each day doesn’t seem appealling I want to have the leverage to negotiate NOT having to do that, or being able to straight up choose not to. It’s tough for young adults because many have large amounts of debt or at least very few assets. I think one thing diversified finanes can become is a “blueprint” of ways to build those income-producing assets, or an “idea board” for ways to pursue those income producing assets.

  11. Thrilled for your new site and already added it to my list of favorites! Financial Independence to me means getting to choose when I wake up in the morning (or afternoon!) and picking who I wish to work with. Right now we’re working on paying down all our debts, then we will grow our passive income through our own business and any other avenues that come along.

  12. “I want to be able to pursue work that I love in life, and not feel like I need to sit in an office all day and hate my life.”
    Absolutely agree!! Congrats on the new site. It looks great!

  13. I also recently started an offshoot blog so I could talk about fashion without it interfering with the purpose of my original blog, so i’m with you there :). I also can’t see myself not working but I would loooove to be financially independent and be able to live and spend without worrying so much.

  14. I agree. For me, financial independence would be being able to work at whatever I want, but I don’t really see it as not working. I might go to school, but the idea of retirement is a bit scary for me, because I genuinely like a lot of what I do.

  15. These are great examples of financial independence. For me, having that freedom means getting out of debt, which I accumulated a lot of during my college years :-). I’ve been learning the right way to go about this and have been slowly digging out after reading Usiere Uko’s new book, Practical Steps to Financial Freedom and Independence: Your Road Map to Exiting the Rat Race and Living Your Dreams. The author does a wonderful job of explaining the right steps to take with illustrated examples. I highly recommend this one for anyone who wants to have more financial freedom. You can find the author’s website here: http://www.financialfreedominspiration.com

  16. Pingback: Weekly Recap – June 14th, 2013 | Common Cents Wealth

  17. Pingback: Carnival of financial independence, 15th edition - Reach Financial Independence

  18. Pingback: Carnival of Money Pros | Making Sense Of Cents

  19. Pingback: Life Updates and $3,287 in Extra Income | Making Sense Of Cents

  20. Pingback: Carnival of Retirement – 74th Edition - Carnival of Retirement

  21. Pingback: Should you get rid of all debt for financial independence? | Diversified Finances

  22. Pingback: Tips for Diversifying Your Income: Slow and Steady Wins the Race | Making Sense Of Cents

  23. Pingback: Fearless Men's Most Wanted

  24. Pingback: Tips for Diversifying Your Income: Slow and Steady Wins the Race – Making Sense Of Cents

Leave a Reply

Your email address will not be published. Required fields are marked *