Financial Freedom vs. Financial Independence: What’s the Difference and Why It Matters
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Overview of Financial Independance vs. Financial Freedom
Financial independance allows you to break free from the 9-5 grind, knowing your finances are no longer a source of stress, while financial freedom empowers you to live life on your own terms, completely unburdened by money worries.
What Financial Independance Means:
- The ability to cover your living expenses without relying on others
- Having enough resources to handle life’s uncertainties without stress
- Making financial choices freely, not out of necessity.
How to Achieve Financial Independance:
- Set a Goal Number: You must get clear on exactly how much you need
- Create a budget: Track your income and expenses
- Pay off debt: Create a plan to pay off your debt as fast as possible
- Save aggressively: Build a habit of saving and investing
- Increase income: Boost earnings through skills, side hustles, or business.
- Invest wisely: Grow wealth with stocks, real estate, or passive income.
- Live below your means: Spend less, save more, and stay disciplined.
Why I Believe Financial Independance and Financial Freedom are Important
Anyone person or family who desires to be truly free from debt, the economy, inflation, stagnation or even give their children a leg-up in to day's world should aspire to achieve financial independance and financial freedom. Without it, we are subject to external forces outside of our control. With it, we are in the driver's seat of life and have the ability to make choices that benefit us and our family, even for generations to come.
My Recommendation
If you are serious about having financial independance and financial freedom, then you need learn about how to master your money. This means getting the knowledge, applying yourself, and being relentlessly focused and persistant until you reach your goal of total financial freedom. Too many forces are at work against us in this fight. If you really want this, you need the cleares (and fastest) path with focused determination.
What Is Financial Independence?
Financial independence means you having enough passive income to cover your living expenses without needing to rely on a paycheck or active work.
It's also wise to have 3-6 months of expenses in a high yield savings account in case you need it. This cash liquidity is essential for peace of mind.
Financial independance also means you’ve built enough wealth because you have assets that generate income for you—whether through investments, online income, rental properties, or business profits. The sum total of these assets allow you to live without depending on a traditional job. It's also wise not to put all your "eggs in 1 basket."
In short, achieving financial independence requires smart money managemen, long-term approach to building wealth which includes making your money work for you.
What to Do Next:
- Cut expenses: Go through your bank statements. Identify unnecessary expenses. Update your budget.
- Pay off debt faster: Ensure all your debt is being paid off as quickly and systematically as possible.
- Build up emergency Fund: Once debt is paid off, use that money to build at least 3-6 months of expenses in a high-yield savings account.
- Develop passive income streams: Explore extra money jobs, ways to make money online or start an online business to that bring in steady income without your daily involvement.
What Is Financial Freedom?
Financial freedom goes beyond just financial independence and having just enough passive income.
Financial freedom is about complete financial control —free from constraints of any financial stress.
Achieving financial freedom means you have the flexibility to live life on your terms.
This blessing gives your family options—lots of options! Whether that’s pursuing your passions, traveling the world, or spending time with loved ones—all without financial worry.
What to Do Next:
- Lifestyle Expenses: Figure out exactly how much money you WANT to add monthly to your budget to live life on your terms. Write it down.
- Calculate FIRE number: Once you have a solid handle on your monthly expenses (including lifestyle expenses (for travel, etc), calculate exactly how much money you need monthly to live financially free—for the rest of your life.
- Long-term investing: Once you paid off all debt and have at least 3-6 months cash in a high yield savings account, it's time set up, continue, or increase your contributions to investment accounts such as IRAs or brokerage accounts that let you build wealth over time.
Why Achieving Both Matters
Financial independence is about reaching a point where your income covers your expenses, but financial freedom encompasses a broader lifestyle. It's about managing your money in a way that gives you the freedom to pursue what matters most to you.
This often involves not just accumulating wealth, but learning to live within your means, budgeting effectively, and eliminating debt. In short, financial freedom is living life on your terms–completely.
Financial independence provides stability and security. It’s the first step toward a life free from financial anxiety.
Financial freedom builds on that foundation, allowing you to focus on your passions, whether that’s traveling, starting a business, or giving back to your community.
This type of independence provides peace of mind, knowing that no matter what happens with your job or career, you have built a solid financial safety net.
What to Do Next:
- Set Clear Financial Goals and Milestones: Break down your journey to financial freedom and independence into measurable goals. Setting specific milestones helps you track progress and stay motivated throughout the process.
- Diversify Your Investments: A balanced portfolio of stocks, bonds, and real estate ensures that your wealth grows while spreading risk across different asset classes. This diversification creates both financial independence and long-term security.
- Educate Yourself About Money Management: Understanding how to manage and grow your money is key to achieving both financial freedom and financial independence. Financial education gives you the tools you need to make informed decisions.
What's Next?
Continue Your Financial Freedom Journey
- Take the next step. Read our post.
- First time here? Take 1st step.
- Need Financial, Coaching Consultation?
- Need Financial Coach? We can help.
Take the next step toward this brighter future today.
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Frequently Asked Questions about Financial Freedom
Financial freedom is the ability to cover all your expenses and achieve your financial goals, without relying on employment income.
Achieving financial freedom involves:
1) eliminating debt
2) managing money wisely
3) saving at least 1 year's worth of expenses
4) Creating multiple income streams to replace your current employment and support your desired lifestyle.
Yes, financial freedom is achievable with proper financial planning, discipline, and persistence. We offer financial freedom coaching to help clients with guidance, accountability, and support to achieve this.
Steps include:
1) assess debt & debt elimination strategy (debt snowball recommended).
2) creating a cash flow plan to manage and track monthly expenses.
3) identify yearly income needed to support financial freedom.
4) assess and increase current income to support financial freedom.
5) start and build emergency savings to 1 year of expenses.
6) Optional: additional savings accounts
7) Optional: invest wisely and consistently, from early age as possible.
The time varies based on individual circumstances, focus, and committment. However, chances greatly increase with financial freedom coaching, and consistent effort.
Benefits include: reduced stress, greater flexibility in life choices, and the ability to pursue passions without financial constraints. In other words, everything you always wanted, but couldn't do.
1) Start by listing and tracking expenses
2) Save $1,000 in an emergency account right away
3) Start paying off smallest debt first. Set a goal date to finish debt.
4) Add a passive income stream to your income.
This will be different for everyone. However, to find this, we recommend following our PATH TO FINANCIAL FREEDOM to determine this.
Financial freedom is more about being cash flow positive, managing expenses from day-to-day, and having passive income streams to cover all yearly expenses.
For most debt free individuals and families, depending on how reasonably lavish their lifestyle, a minimum yearly income needed to support financial independance might be anywhere from $175,000 to $250,000 per year. This does not include the cost of college education or buying a home cash. However, it should include purchasing a resonably priced car in cash.
Common obstacles include
1) no cash flow plan (i.e. budget)
2) no tracking expenses, leading to over-spending
3) high and recurring debt
4) insufficient savings to cover unexpected expenses
5) lack of unity among couples for how to spend money (or where it goes).
Yes. True financial freedom is the ability to cover all your lifestyle expenses, without your current employment. Therefore, creating passive income streams are necessary to achieve financial freedom. It may be through creating one or multiple income streams from:
1) online business website(s)
2) rental properties
3) investments (retirement, or otherwise)
4) dividends
5) royalties
However, it is recommended you only choose 1 to learn and implement until you are successful. You cannot leave anything to chance when it comes to your money and your financial freedom!
We empower you— with a clear curated content path with practical steps, and expert advice to achieve financial freedom in the shortest time possible.
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