What is the real meaning of financial freedom?

Ever since I started working on this series – ‘In pursuit of Financial Freedom‘, I have been pondering on the question – what is the real meaning of financial freedom? Does it mean earning enough so you never have to work again? Or does it mean to be content with what you have? Does it mean becoming debt-free? Or does it mean having investments that will help you retire early? And to be honest, I don’t think I have a concrete, single-line definition of what it means to be financially free.

One of my favorite definitions I have found so far comes from the book ‘The Psychology of Money‘ (a must-read) where Morgan Housel says –

Financial Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want.

Morgan Housel

This and many other statements from the book stuck with me. And I started reading more and more on this topic. Another great quote that explains how to achieve financial freedom is by Ravikant Naval in The Almanack of Naval Ravikant where he says –

You’re not going to get rich renting out your time. You must own equity – a piece of a business – to gain your financial freedom

Naval Ravikant

These 2 books and many others have helped me understand what financial freedom means to me. And that is what I want to share with you so you can create your own definition that makes sense to you.

1. Control over time

For me, the meaning of financial freedom is the ability to control my own time. It means I can decide what I want to do with my time, who do I want to work with, and for how long. I don’t want to slog my ass off working in a cubicle. I have learned that there are basically 2 ways of making money – rent your time or rent your money. And if your income is directly proportional to the time you spend on your work, you won’t achieve freedom. The freedom to decide what your time is worth and what it is not. It is for this reason that renting the money that you made by renting your time becomes very important. Passive income becomes very important and owning Equity doubly soo. I have explored why is investing your money necessary in my older blog posts.

2. One year Sabbatical

I keep asking myself this question. Can I take a one-year sabbatical without having to worry about how would I sustain myself financially? Can I put my current job on pause for a year so I could pursue something else? Maybe a different career option or exploring my passion for writing or truly living the mountain life. The world is full of possibilities, full of different pathways. But can I afford to stray away from my current path and try a different one and if it doesn’t work, come back to the original one? Without consequences. The answer currently is no.

But I would know I have achieved financial freedom when it becomes a yes. So, can you take a one-year sabbatical without having to worry about your finances?

3. Navigate any emergency

This is a big one if you truly want to achieve financial independence. Can you navigate a personal or family emergency without having to worry about money? An emergency comes with no notice. You could lose your job, you or your loved one could become seriously ill. Or worse, you could die. Would your family be able to sustain in that situation? That is an important question to ask. And that is exactly why you need to cover the basics before you start renting your money. Adequate Insurance (term and health) and building an emergency corpus are non-negotiable action items if you truly want to be financially free.

4. Being ‘wealthy’ not ‘rich’

There is a difference between being rich and being wealthy. And it is very important that we understand it. A wealthy person is someone who is able to sustain their wealth throughout their life. A rich person is one who has money at the moment with no outlook of the future. Wealth is a mindset that comes with long-term habits like saving your income, investing it, reducing unnecessary expenses, thinking about long-term goals, etc. I would argue being ‘rich’ is a mindset too. In it, you spend beyond your means to maintain a lifestyle you can’t sustain.

I would consider myself financially free when I become wealthy and not just rich.

5. The girlfriend expense

I started dating my now wife, then girlfriend, in 2006. I was in college, completely broke, and dependent on my parents for my monthly expenses. We lived in different cities and could only meet if I was able to save some money to travel to her over the weekends. Basically, I could not afford a girlfriend or a relationship if I couldn’t figure out the money issue fast. And I did. I took up odd jobs as mystery shoppers and earned side income. And I was able to sustain that relationship. I was able to propose to her with a ring that I bought using this money (she said yes). So for the 20-year-old me, financial freedom meant being able to sustain a girlfriend.

Why am I saying this story? Because this shows how the definition of financial freedom changes for you too as you go into different phases of your life. I was able to create lifetime-worth memories with the money I earned on the side. Sure, that money was born out of necessity. And if it wasn’t for the girlfriend expense, I would probably never had earned it.

So, what is financial freedom you ask? It is to be able to create lifetime memories without having to worry too much about the money part. The money will figure itself out.

6. Not dependent on money for happiness

If somebody says that money is not important for your happiness, I would say they are lying. Or they do not understand the ways of the world. Don’t get me wrong. I don’t equate money to happiness. But I do believe that having your basic necessities taken care of goes a long way to even strive for happiness. And for that, you need money. A lot of big life decisions are based on money. Can you have a big wedding you have always dreamt of? Or can you buy that car for a road trip across the country? Can you take a vacation to the Maldives so you can share the pictures on Instagram like everyone else? We are reliant on money for happiness. And I would consider myself financially free when I no longer need to depend on money for happiness. I would be independent when money is not in the driving seat for all big life decisions.

7. Being debt free

I hate debt. I hate being reliant on another human being for anything, let alone money. That is the reason I would rather live frugally than asking money from a friend or a relative (or even my parents). I have never done that. I will never do that. Taking a loan from a bank is a different story. Some types of debt are even considered good. Like a home loan. Because it helps you achieve your dream of owning a house with a smaller interest rate. Sure. I understand that. But I still don’t like the feeling of this debt bound to me. It is suffocating. I think of quitting my job or taking a long leave and moving to the mountains often. And then I come back to reality realizing I have an EMI so large that I can’t afford to even take a sabbatical, let alone quit. So the day I become debt-free is the day I would consider myself financially free. And I have started taking a lot of steps in that direction already.

Conclusion

Different people define financial freedom differently. And that is ok, that is how it is supposed to be. It is not a single umbrella definition for everyone. It means something else for me than it does to you. But it is important to define it. Layout what it means to be free from financial worries. Write them down. And work towards them. One by one. Slowly. You will not reach there in a day. You won’t even reach there in a year or 5 years. It demands time and effort, which, if you are willing to put early in your life, you will see compounding benefits from it later.

So what is your definition of financial freedom? Please share in the comment section below and do not forget to check out my other blog posts on personal finance.