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What is Financial Independence?
My husband and I got married in the spring of 2018. We went on an amazing 2-week honeymoon to Hawaii and had the time of our lives! On one of our last days in Hawaii, I remember swimming in the pool, and thinking – Wouldn’t it be great if we could do more of this?
Related: Married to a Real Estate Investor
That really got the gears in my head-turning… I went from thinking “I wish we could do more of this,” to “How can we do more of this?” The thought struck me pretty hard in Hawaii and I couldn’t stop thinking about how I could make that a reality.
Remembering back on some things I had learned previously on BiggerPockets.com, I decided to dive back into their blog and forums to find out more. I got hooked on to their weekly podcast. I loved hearing about other people’s experiences in real estate; I was so inspired. That is when I truly started to understand the concept of Financial Independence. Which lead us to purchase our very first rental property!
But if you are still new to the concept of FI, you may be wondering, “What is Financial Independence anyway??”
3 Ways to Define Financial Independence
There are a few ways I have heard the concept explained. Here are three definitions to help understand financial independence.
1. The ability to live off of the income of your own personal resources.
This is a definition I heard quoted on a podcast recently. Let me explain this a bit for you. You may be thinking, what are “your own personal resources?” This can mean different things, but in real estate, this typically means rental properties. A rental property can be a resource that is providing a monthly income.
You could also own a business – that would be your own personal resource that would create income. Or maybe you own shares of a company that are paying you dividends.
Each one of these things could be providing an income to you. If you are earning enough income from these resources to cover your monthly expenses, this would be considered financial freedom!
Related: Great Habits You Pick Up While Pursuing Financial Independence
2. Not needing to work for income because you have passive income that exceeds your expenses.
This one comes from a blog post on BiggerPockets from 2013! I highly recommend reading it because it helps explain how the goal of financial freedom is not that far fetched.
Let’s explore that word passive. If we Google the word passive, this is the definition we get: accepting or allowing what happens or what others do, without active response or resistance. I think the important phrase in this definition that pertains to financial freedom is “without active response.”
When you reach financial independence, you have reached the point where you no longer have to work to survive! Doesn’t that sound liberating?
3. The freedom to do what you want, when you want, where you want with whomever you want!
This is a definition that Brandon Turner, the host of the BiggerPockets podcast, uses all the time. I enjoy this definition because it encompasses the goals that I am trying to achieve through real estate. Once someone reaches financial freedom, they have the ability to do whatever they want! They could potentially quit their job and let their personal resources do their thing.
There are a lot of people who are financially independent, but they love their job and choose to continue to work. But what happens if one day they become very sick and can no longer work? Well, they would be fine! Because they have resources providing them a monthly income!
The key take away from these definitions is this:
With financial freedom, YOU don’t work for money, MONEY works for you! This is otherwise known as investing. What you invest in is making you money – without you needing to put in the hours every week at your J-O-B.
Are you currently working a 9-5 job and believe you are financially independent? Well, then ask yourself this question – If I were to quit my job today, would my other sources of income be able to support my current lifestyle? If the answer is yes, then congrats! Because that means you are financially free!
My husband and I are not yet, but we are working diligently to get there! It is not something that you can accomplish overnight. Honestly, it can take up to several years to reach that point. I wish it was as simple as just turning on a lightbulb, but it is rather a series of candles lighting one another. It takes persistence and a quite a few steps! But it is achievable!
Related: How to Set Yourself Up For Success in Any Situation
What is Your ‘Why’
Before jumping into your journey towards financial independence, you need to figure out your ‘why.’
Why are you pursuing financial independence? Write it down and come back to it when you are having a difficult time keeping up with your budget.
Being financially free opens up the door to so many possibilities. You would have the ability to choose whether or not you want to work. You can spend more time with family and friends! Or spend more time doing the activities you love.
I would like to be able to spend more time volunteering, with my family, traveling, going to the gym and so much more!
If you are someone just discovering the concept of financial freedom I encourage you to write down your WHYS. Why do you want to reach financial independence?
If it’s solely for the purpose of money, I can tell you now my friend, the journey will be long and painful. Dig deeper than that and really explore your reasons why you want to reach financial freedom.
If you are on
Blog Article Spotlight!
If you’re ready to dive into the world of Financial Independence, I highly recommend the ChooseFI blog. They have been researching this topic for years, and have helped out a lot of people along the way. Check out their article Beginner’s Guide to Reaching Financial Independence.
Are you ready to start your journey towards financial independence?? Fantastic! Check out these articles to get you started on the right path!
Starting the Journey Towards Financial Independence
It is Time to Get a Side Hustle
7 Things You Should Stop Paying for If You’re Trying To Reach Financial Independence
Can We Pursue Both Faith and Financial Independence?
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