In terms of money, savings, and financial well-being, everyone has their vision of happiness and freedom. We study the concept of financial independence, its definitions, and the means to achieve it.
We all aspire to financial independence. But what exactly are we talking about? The path you take to achieve financial independence depends on your personality, lifestyle, culture, and short- and long-term goals. In the following points, we will explore different ways to approach the concept of financial independence, the likely obstacles you will encounter in this search, and some steps we recommend to achieve this independence that you hold dear. Let’s go!
Financial independence, what is it?
Good question. The answer? There are as many answers as there are people you ask the question. Some will tell you that financial independence means having sufficient assets never to count again. But this is to forget that freedom is a subjective concept. Your goals, your lifestyle, where you live, and your age are all factors that affect your perception of this freedom.
To get you started, here are some things to think about to define what financial independence means to you:
- Receive a stable income and feel that you are in control of your finances;
- Be on track with your financial goals;
- Have enough money aside to cover all eventualities;
- Have enough money available to fund your lifestyle.
All these contribute to a sense of financial well-being and confidence; you have enough to accomplish what you need and want without worry or stress.
Here is our broadest definition of financial independence: easily managing your money and your life in the way that suits you best.
Under what circumstances do you feel free (financially)?
Can freedom be bought? Not really. Nevertheless, money can provide the necessary resources to achieve comfort and contentment. For some of us, experiencing financial independence means having enough money to cruise the Caribbean on a yacht. For others, it’s more about being able to afford some material comfort or simply having enough cash to devote to what makes them happy.
Among us, some strive to acquire a house, while others prefer to travel the world. Some want to work hard and save massively to retire early, while others prefer to use their money to seize the day. Finally, it’s about making choices that correspond to our values without fear of possible financial consequences.
Below, we have sent you a few things that we think are useful to consider to provide you with a framework that will allow you to arrive at your definition of financial independence:
The freedom to choose
The ability to make choices that are right for you and the life you want to lead is one of the essential dimensions of freedom, financially and in its broadest senses. It may mean having enough money to be free to choose what you do with your time. However, it can mean many other things: freedom to choose can also mean increasing your skills in your field so that you are spoiled for choice among high-paying job offers later on.
Or, it could mean pursuing your passion as an artist, teaching abroad, or working for an NGO. You might prioritize a career that allows you to start a family or choose to be self-employed .and devote yourself to projects that inspire you. Being able to choose is a source of fulfillment and a major type of financial independence. This freedom to choose further means that you can make decisions that make sense to you and build your approach to managing your finances based on your values.
Freedom of security
Although some prefer spontaneity to stability, almost all of us crave a sense of security. From a financial point of view, security could translate into stable and reliable income over the long term. It could also be having enough money aside to deal with emergencies or being able to take care of your children. And other family members for whom you may be responsible. For other people, security is still investing in acquiring a principal residence, contributing massively for retirement, or having passive income sources such as investments or rental properties. No matter who you are, it’s important to ask yourself what makes you feel safe and to take steps to achieve it.
The freedom to go on an adventure
Looking for new thrills? Many of us consider adventure and exploration part of the feeling of freedom. Whether you’re traveling for business or pleasure, embarking on an exciting new career, or taking time out to explore the world or pursue your passions, making adventure part of your life can be your key to happiness. Whatever it is for you, it’s worth thinking about how financial independence can allow you to feel the excitement of adventure. You could choose a career that allows you to travel the world as a business traveler or as a digital nomad. You could save each month rigorously to pay for an extended vacation, sabbatical, or early retirement and explore the world afterward.
The freedom of comfort
Under what circumstances do you feel comfortable? For some people, affluence has enough money to make purchases that make them happy and comfortable. At the same time, others believe it has a sufficient amount in the bank or a pension fund to feel in agreement with their standard of living. Do you feel more comfortable on a city apartment’s balcony or a country house’s couch? Do you see the flexibility of renting as a benefit, or do you feel more comfortable being a landlord? Defining your notion of comfort and how it relates to your financial goals is very relevant, regardless of age.
The freedom of time
For us, reflecting on your time and what you do with it is essential when it comes to financial independence, whether at work, in your family, on the roads, or everywhere else. Also, this is reflected in your spending and saving patterns. For example, if you dream of retiring before your 50s or 60s, you will probably work hard in the early years of your career only to be rewarded later in life with more freedom in what you do. Your time. You could choose a traditional or part-time job that frees up more time for your passions now or decide to work remotely so you can travel.
Ultimately, being financially independent means balancing your needs and wants with your money or hope to have one day. Then you must set goals to achieve the financial independence that suits you: time, security, adventure? The good news? There is no right or wrong way to imagine financial independence, only multiple possibilities to imagine happiness!
What are the barriers to financial independence?
In an ideal world, everyone would have enough money to be happy, healthy, and financially stress-free. However – and we know this all too well – the world is far from ideal, and there are many factors that can stand in the way of financial independence.
In more developed countries, many people are presented with more opportunities for greater financial independence, including the transmission of family assets and access to education. People who live in the North have less to travel than those who live in the South, where economies are less powerful and weaker. The situation is complex, but it should be noted that many are financially disadvantaged through no fault of their own. Even on a national scale, geography affects the cost of living, education, and job prospects. For example, urban areas generally offer better-paying job opportunities than rural areas, but living there is also much more expensive.
No matter where you live, your socioeconomic status can impact your path to financial independence. Anyone who begins their adult life and receives the help of their parents and a good education is more likely to achieve the financial independence they aspire to than someone who does not have the same advantages. Moreover, despite some promising progress, inequalities remain a real obstacle.
Even when you seem to be on the right track, our world can hold surprises for you that will affect your finances. Stock market crashes, inflation, geopolitical conflicts, and supply issues can wreak havoc on the global economy, among other things. In the most extreme situations, these types of global disruptions can present very real challenges for individuals, including job loss, housing market crises, a depreciation in the value of their pension fund, and more.
It’s depressing, but achieving true financial independence requires knowing what you want and what you’re fighting against. This way, you are better able to make informed decisions based on your own situation.
Key steps to achieving financial independence
After all of our exploration of the concept of financial independence, it becomes clear that there are as many ways to enjoy it as there are people. That said, there are a few things to keep in mind to avoid well-known financial pitfalls and manage your money more independently. Whatever financial independence you aspire to, here is a checklist of things to consider:
- Define your goals. Figure out what you want out of life and how much money you might need to make that dream come true, both short-term and long-term.
- Eliminate all your debts with high-interest rates as soon as possible. Debts often spoil the party, especially those on your credit cards, because they come with prohibitive interest rates. If you have incurred this kind of debt or any other kind of debt, try to pay it off as soon as possible in order to free your mind and your bank account.
- Save for all eventualities. Life is full of surprises; when they happen, it is better to prepare beforehand by setting aside the equivalent of three months of charges. Hidden costs like home repairs, medical emergencies, or broken-down vehicles can hurt you financially, so it’s always a good idea to have some cash on hand, just in case.
- Contribute to pension funds. Whether you want to continue working your whole life or travel the world as soon as your 60th birthday hits, planning for your retirement is an integral part of securing your financial future. Take advantage of your company retirement savings plans or build your own investment portfolio to grow your savings.
- Buy your own house. It may be an option for some, but owning your own apartment or house can be a great way to build your wealth if you can afford it. You’ll save on housing costs as you get older and can pass something on to your children if you decide to have any.
- Invest what you can, whenever you can. One way to achieve financial success is through passive income generation. It could be gains made from buy-to-let investments or money you’ve accumulated in investment accounts. Although it involves risks, investing can be a great way to grow your wealth.