What is Financial Freedom?

For many consumers, financial freedom is a mindset. It’s a state of mind. You don’t need a certain number in your bank account to feel financially free. You just need to have the ability to live how you would like and not be tied down by financial restraints. You can have freedom but not financial freedom, and if you have financial freedom but no freedom, are you really free? Everyone has a different value system but sometimes there isn’t always a set number you can attribute to saying you’ve achieved financial freedom. Priorities and financial requirements have become different across the generations and people value money differently. Some consumers might feel content as they are while others might need a very significant amount of savings to feel financially free.

Comfortable Enough to Not Limit Purchases

For some people being financially free means that you don’t have to limit yourself with regards to the purchases you make (within reason of course). You have all you need in terms of essentials and can purchase whatever you like (for the most part). If your car has an issue you can fix it, if your washer breaks you can buy a new one. Financial freedom is a mindset but it also means that you’ve got the little things covered and you won’t get taken for a loop by small mishaps or financial setbacks. You are comfortable in your own property and are able to sleep easy at night knowing you can handle unexpected expenses.

Passive Income and Investments

If you’re financially free you’re more likely to have passive income generating investments and other side income that helps besides just your ordinary income. You might not be restricted in your ability to invest more and you might have a higher net worth relative to your peers. Your financial freedom might also mean you are more likely to retire sooner than some of your peers. With passive income you are less reliant on your job/career for income and can instead focus on past investments you’ve made.

Financial Preparedness

Those that have achieved financial freedom, they are financially prepared for unexpected expenses and then some. They can weather a financial storm and are likely those that will take advantage of cheaper prices during a recession as opposed to be hurt by it.

Relative Nature of Financial Freedom

You don’t have to have millions in the bank to be financially free, the definition is very relative and everyone has their own idea of what it means. For example, if your income is $5,000 and you generate $5,000 a month in passive income and your expenses are $5,000, you might consider yourself to be financially free. Now let’s say there is also another individual who makes $5,000 and has $2,000 in passive income but expenses are only $2,000 a month. You both have the same leftover income but your lifestyles might be completely different. The consumer with $2,000 a month in expenses might live a different lifestyle but could be more content with less. Nothing is stopping either of these two individuals from being considered financially free.