What is financial independence?

It might not be what you think.

This might be a new concept to you or maybe you are very familiar with term. However there appears to be a wide range of interpretations on what financial independence means. In response to hearing about financial independence (FI) I’ve had people tell me “I would be bored if I never have to work again” or “I would spend the rest of my life living on a yacht!” FI means something different to everyone for good reason. The concept of independence and freedom are unique to each person.

Let’s start with a definition. According to wikipedia “Financial independence is the status of having enough income to pay one's living expenses for the rest of one's life without having to be employed or dependent on others.” This is usually accomplished with generating streams of passive income. Passive income generally is income that requires minimal labor to earn and maintain. While the tax authorities may have more specific guidelines on what qualifies as passive active portfolio income for the purposes of simplicity we will go with money you can earn while you are sleeping. An example would be interest from a savings account or rental income from real estate or royalties from a published book.

Now if you can generate enough passive income to cover you cost of living on a daily basis and for as long as you think you will live then many may say you have achieved FI. Do people reach FI and still work? Absolutely! In fact many people do still work but not because they have to but because want to. That is a key differentiation. Often people who first reach FI have very little change in their lifestyle. They might quit their job or go on a prolonged vacation but that might be all you notice outwardly. Usually people spend years living within their means and on a budget to reach FI and aren’t about to go crazy and do anything to jeopardize their new hard earned lifestyle. Many people in the FIRE (Financial independence Retire Early) community start to pursue passion projects. Getting involved in local charities, supporting the arts or turning hobbies into side businesses.

If you are thinking is seems crazy why would someone work when they don’t have to, I would answer with one word: Purpose. We all want to feel like our lives have meaning and to give a greater purpose to our efforts. The money from passive investments pays for all our basic needs and wants. But what if you have greater dreams? Things that seemed selfish or frivoluos to pursue when you had financial responsibilities. Well now you can spend your day’s coaching little league full time, or selling your homemade jams at the farmers market or starting a business that fulfills you every day.

It is that pursuit of passion and dreams that inspired me to become a coach and help others achieve their dreams through FI. I truly believe that when people do work they love and find fulfilling they contribute to society at a more impactful level. Pursuing a dream or working on a passion is a special kind of magic balm to the soul. It allows us to reach self-actualization, contentment and focus beyond ourselves and on to the needs of those around us. My dream is to help others live their lives with purpose and focus that leads them to the financial freedom to pursue their dreams. If their is a way I can help you get clarity on how you can find your path to financial freedom please reach out!