What is financial freedom?

Disclaimer: this blog post contains general information. This is NOT personal financial advice and should not be acted upon. Please speak to your financial advisor or accountant about your specific situation before making any investment decision.

Is financial freedom being able to buy whatever you want, whenever you want? Being so rich, you can buy a Lamborghini like it’s chump change?

Well, maybe.

Every person's definition of Financial Freedom will be different, and that's okay. Learning your definition of Financial Freedom is actually the first step to Financial Freedom. Disconnecting yourself from the pack and figuring out your ideal life is the first and most important step in the process - as only you can define what you aim to achieve on your road to Financial Freedom.

As a basic concept though, Financial Freedom is where your passive income^ is sufficient enough to cover your ongoing lifestyle expenses - whether that be a minimalist, moderate or luxurious lifestyle.

Money is only a means to achieve a goal and finding out what that goal is, is truly the most important thing. So find out what motivates you to work for money. Envision the financially free life you want and set that as your goal to achieve. Without a goal, you will wander aimlessly through life and you will never have a point of reference as to your own success.

For example, Financial Freedom for me personally is being able to work a minimal amount, whenever I want, wherever I want. It means being able to wake up in the morning without any expectation to rush to the office to spend a dreaded 9 hours in front of a computer screen.

I want to be able to sit out on the deck in the morning, soaking up the morning sun, drinking a coffee. I want to spend more quality time with my children, train more, go on hikes, read a book at the beach – but doing all of that knowing that I’ve got a consistent source of income paying for my lifestyle needs.

Sure, I still want to live in a nice house, have a nice car and to be able to travel overseas, but that in itself can be done modestly. I don't need a six bedroom house in the ritzy area of town, or a $200,000 car to drive around in (but hey, nothing against it if that's what you desire!). The more important thing for me is not having to work my life away, making someone else rich while I struggle to make ends meet, only to be able to do what I want to do in retirement in my 60's.

Life is meant to be LIVED and that can only be done if you have achieved Financial Freedom.

In essence, to achieve Financial Freedom you must focus on using your earnings to accumulate income producing assets - enough so that the income eventually is sufficient to fund your ongoing lifestyle expenses. So if you don't have earnings, that's a good point to start at - start a business, sell your skills, get a job (do all 3 if you have to!). If you have an income but your earnings are just getting you by, look for ways to increase your earnings so you have the means to invest in your own Financial Freedom.

You can be savvy and reduce your expenses, get rid of bad debt; it sure helps. But you don't necessarily have to live well below your means if that's not what you want to do. No matter what your financial situation is though, you just have to ensure that earnings are higher than outgoings, and put those earnings to good use! (i.e. investing in income producing assets!)

It's as simple as that.

Financial Freedom doesn't come easy - it takes clear goals, discipline and it takes time. It takes the ability to self-assess, identifying what you're currently doing wrong and figuring out what you need to change to succeed. It takes hard work, dedication and a positive mindset, as there will be setbacks along the road. But it's all worthwhile in the end.

^Passive Income is the income you derive without needing to trade your time for money. It's income that you produce without needing to work!

*I must admit, I don't like picking a number and blanket applying it to everyone's situation as each different person lives a different life. Every one of us has a different income capacity, a different lifestyle and different goals. If you are struggling financially due to a low income and lots of bad debt, look to increase your income capacity and pay off bad debt first. If you don't know how to do that effectively, talk to a financial advisor for assistance.