The concept of "Financial Freedom" is, understandably, a popular one. But what does it actually mean? The answer is simple, but truly understanding it will change your financial focus.
Everyone dreams of financial freedom. It doesn’t matter if you are waiting tables at Chillis’, the CEO of a large company, or a stay-at-home Mum, the illusive concept of financial freedom calls to us. We want more time and more money, so that we can spend some of that doing things we want to do as opposed to what we have to do.
But, generally speaking, that is where we stop. At the “Wouldn’t it be nice if…” stage. We never really bother to think about how we could achieve freedom in our life. What this would look like. How things would be different. Let alone the fact that, due to a crumbling social security system, financial freedom is something we need to achieve. Not want. Not dream of. Need to.
But that still doesn’t answer the question of what do people actually mean when they refer to “Financial Freedom”. People have this vague concept of it being about “money in the bank” (as I did), or earning much more than they are spending. In truth, it has nothing to do with either of these things (although the first answer at least moves you in the correct direction). No, the real definition of financial freedom is this:
Having enough passive income to cover all your living expenses indefinitely.
That’s it. Nice and short. That is (or should be) the is the purpose of all financial strategies. Every time you make a financial decision, in the background should be a little voice whispering “Does this increase my passive income?” Now sometimes that answer may be no, and for good reason, but the question needs to be asked none-the-less. Otherwise, just like any other goal, it will be nearly impossible to hit.
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