What is Financial Freedom ?

The answer to this question although simple has been the cause of much confusion and miss-information.


Over the years I have read and heard many different and varied definitions that highlight the confusion around this subject.

Financial freedom isn’t the same as being rich. Although people often confuse the two, they are completely separate goals. One person could be completely financially free earning $15,000 per year. Another person could be trapped, even with a 20 million dollar portfolio.

And I have seen examples of both that are equally stunning.


What is the Need For Financial Freedom ?

To clearly illustrate this point, if I tell you that today will be the last day you are employed.  The company you are working with suddenly fell into bankruptcy and can no longer sustain its operation, what will you feel?  Or if you were fired because the company is cutting its cost, how will you act upon it?

If you felt scared and worried with the news because you don’t have enough savings to sustain your needs, or worse, you are filled with debts that you can’t be unemployed, then you are financially broke even how high your current salary is now, and even though you have owned many “assets” or properties.

The life savings of the average 50-year-old is $2300!

You can not last long on this sort of money. Worse still with almost 100% of disposable income now being taken by debt any hiccup in your employment, no matter how short has dire financial consequences.


Financial Freedom

I define Financial Freedom as the ability to acquire the lifestyle that you want on a sustainable basis.

Now as you have experience above work is not a sustainable means to fund a lifestyle. Our working lives are limited and our needs continue till our death.

When Americans reach age 65, after working hard for 40 or more years, only 1% will be wealthy.

Only 4% of retirees will have adequate investments or savings to actually retire at some level of comfort.

So true Financial Freedom exist only when your sustainable passive income exceeds the cost of your lifestyle.

What is Sustainable Passive Income ?

Financial Freedom can be exist both for the person that chooses the simple life, opts out (somewhat) grows their own vegetables, lives in modest priced accommodation and requires very little money to exist. Likewise Financial Freedom  also exits for those in the lap of luxury- mansions by the sea, exotic overseas holidays, luxury cars and boats and the finest of everything.

The universal factor that allows both of these extreme lifestyles to qualify as Financial Freedom is ‘Sustainable Passive Income”.

Primarily Passive income is anything that provides you money without the need for you to work for it. Examples may include, commercial or residential rents that you receive from properties that you own or control, dividends form shares that you have, profits from a business run under management that you own and so on.

Basically anything that makes you money without the need for you to do something.

Sustainable Financial Freedom


Now as with life absolutes rarely exist. So I use in my definition of Financial Freedom the term Sustainable.


Many people enjoy Financial Freedom through income that requires very little effort. In my example above where I mentioned a Business ran by managers, I would expect here that there would always be a requirement for the owner to pop in every few weeks or each month at least to check that everything is running smoothly. Further the owner may even have to review a series of Business Key Performance Indicators (KPI’s) each week, perhaps form home again to make sure the business is profitable.


To my way of thinking if this business produced more money that the owner required to pay all their bills needed to live their chosen lifestyle, even if this meant that they had to apply a few hours a week to maintain the income, I would class this as Financial Freedom.


The key is sustainable passive income that exceeds all of the costs and expenses associated with your chosen lifestyle.


I wish you all the best on your journey to Financial Freedom and hope this explanation of What is Financial Freedom helpful.

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