What does “financial freedom” actually mean?
At its core, financial freedom means living the life you want without money controlling you.
But we really do all have different definitions. For some it means you:
- Work a job and can afford to go on an overseas holiday once a year.
- Can retire early to spend more time with family.
- Don’t lie awake at night worrying about bills.
But since it means different things to different people … I’ve had to come up with my own definition.
These are the two tests that I think define whether you are financially free or not. You need to answer ‘yes’ to both of these to be financially free:
- If you stopped working today. Can you afford to not go back to your job?
So if you could stop working today and live for 3 months … you can afford 3 months of financial freedom.
If you can afford to never go back to work, you have financial freedom for life.
That said, being financially free doesn’t necessarily mean you’ll never work again. It means you don’t haveto.
- When you stop going to work, can you spend less than a day a week managing your assets?
For example, a business owner might be able to stop working. But if they have to spend 4 days a week still managing the business, that’s not financially free.
Similarly, a property investor might not have a job. But if they have to spend 2 days a week inspecting properties … I’m not counting that as true financial freedom either.
So, by that definition, most people aren’t financially free.
They’re tied to trading time to earn money.
Think about it: ‘If you stopped showing up to work tomorrow, would the bills still get paid?’ If the answer is ‘no’, then you’re financially free. You’re dependent on your job.
That’s ok. Most of us are in that position.
