Financial freedom or financial independence: what’s the difference?

Think about your financial goals for a minute. If you were asked what you’re aiming for, what your investments are building towards or what your big goals are, what would you say?

For many people, the answer is “financial independence”. They’re aiming for a life in which they don’t have to rely on anyone else for money matters. But what if that wasn’t a lofty enough goal? What about financial freedom?

What’s the difference?

When we talk about financial independence, we usually mean a situation where people have built up their financial lives to the point where they do not need anyone else.

They might have enough money in investments to support their lifestyle, or a solid passive income that means they do not have to go to work if they don’t want to. Maybe they’ve built a business to the point where they can step back and aren’t required to work in it day-to-day.

But contrast that with financial freedom. When someone is financially free, they aren’t worrying about money at all. They don’t have to cut their cloth to fit the passive income they’re getting from a rental property, for example, or adjust their expenses to cope when the returns on their investments are down. They have sufficient resources that they can pursue whatever they want to do, without worrying about money. Sounds pretty good, right?

So, how can you get there? If you want financial freedom to be your end goal, there a few things you can do.

Plan big

The first thing to think about is what amount of wealth you need to be financially free. This will be different for everyone. 

The number won’t be the amount that you require to be financially secure – where you know that your bills can be covered for a while if you quit your job – or financially independent, where you’re living a decent lifestyle off your investments.

Financial freedom is your best-case-scenario lifestyle. We can help you work out how much money you think you need to achieve this, and work back to the lump sum you’ll need to accumulate to get there.

Once you have a goal, it’s easier to create a clear strategy. The strategy will take into account things like your investment timeframe and the resources you currently have available to you to invest.

Diversify

If you’re planning to take financial flight, it is likely to be important that you diversify your investments. It’s often the case that one asset class is doing better than another at any one time, and having a decent spread across investments means you’re more likely to have some of your investments power you ahead at any one time. We can help you work out what the right fit will be.

Ready to talk?

The prospect of financial freedom can be a hugely exciting one. If you’re ready to get started on the path, give us a call. We can help you come up with a realistic and effective strategy that will deliver the results, and lifestyle, that you’re aiming for.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.