What Financial Independence Means
Earlier this month, I wrote about establishing a personal Financial Independence Day date as a goal. (If you missed it, you can read it by clicking here Establish Your Personal Financial Independence Day). Financial independence is what most people aspire to in their retirement years. Some people achieve financial independence and are able to retire very early in their lives. Others shoot for the typical retirement age in their mid-to-late-60’s or early 70’s. No matter when you want to achieve it, you need to have an idea of what financial independence means to you.
Financial Independence Means Different Things To Different People
No matter what financial independence means to you, we can help you plan for and work toward that goal. If you haven’t thought about what it means to you yet, I’m providing ideas that others have about it. Maybe some of these definitions will spark some fresh ideas for you
Some Typical Definitions of Financial Independence
While financial independence is defined differently by different people, it generally means not being dependent on a job or anyone else to meet your expenses and maintain your chosen lifestyle.
According to some people, 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.
While some claim financial independence is when you save roughly 25 times your annual spending, I’m not big on this formula nor do I think it applies to many people. The idea behind this is that when you achieve this amount your finances will supposedly be independent of your paycheck.
There are some who think that being financially independent means that you could retire early and continue living your current life without ever having to work again. While there are others who would insist that in order to be financially independent, you must build multiple streams of income thus allowing you to continue earning income regardless of what you choose to do day-to-day.
Some financially independent people have assets that generate income (cash flow) that is at least equal to their expenses.
It’s Your Independence And Your Definition
Like I mentioned early, everyone has a different idea of what financial independence means. Likewise there are a multitude of strategies to achieve financial independence, each with their own benefits and drawbacks. But like any other goal or destination you set for yourself, it’s helpful to have a plan. The sooner you establish a goal and work up a plan, the sooner you will then have an idea of what financial independence means to you. That definition could change over time and working with a fiduciary financial advisor can help you define and refine your ideas over time and help you achieve your goals.
If you’re ready to start defining what financial independence means to you and working toward that, give us a call. We would be delighted to help you achieve that goal by establishing a solid, workable plan.