What is Financial Independence?

I’ve been thinking about this post all week long…..Financial Independence (FI): what is it? but most importantly what does it mean to me?. If this blog is meant to be a resource for you I think is appropriate we set the stage around FI.

First, did we miss this subject in school? how come so many people don’t have a clue about this or live their lives paycheck to paycheck?. As I was reflecting about it, I came across an interesting flowchart by Fitz which I slightly adjusted based on my own perspective:

What we are taught when growing up:

What those seeking FI are doing:

What those seeking FI have reached:

If you take a second and Google “Financial Independence” you will be surprised by the many posts and articles that discuss this topic in length. Let me summarize some keywords I found that might help you start developing your own definition.

  • Having income generating assets
  • To have income from assets that cover your current expenses
  • You no longer have to work for your money
  • Living life without having to think about money
  • Having choices in life
  • Precursor to Financial Freedom

The list could go on but you’re starting to get the point. Assets, income, expenses, work, and options. Pretty simple and easy to digest right?. Let’s do one more thing let’s take a look at one definition to see if we can piece it out.

According to Wikipedia, Financial Independence is “the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income and/or cash flow from dipping into the assets that are at least as great as their expenses”.

Keywords in this definition are:

  • A state: suggests a place or point in life you’re striving to reach
  • Sufficient wealth: I’m thinking about numbers
  • Not having to work: not sure If I agree with this; however, it infers something I do like which is having options
  • Income from dipping into the assets: this seems critical if you want to reach FI

The more I think about it the more I realize it’s not going to be easy to come up with a single phrase that captures it all. What if instead, I try to summarize what I think FI IS NOT?

  • Having money as your role model
  • Having money but no family or friends
  • Having money but hating your job
  • Having money but no time to spend it
  • Having money but no desire to enjoy it
  • Having money with no purpose in life
  • Having money but no happiness

Interestingly enough some people think about FI in the context of retirement; however, to some, there is an automatic connotation associated with this word that pictures individuals reaching the age of 60+ enjoying the benefits of a 401k, social security, etc. To those who think that way all I can say is that age is completely irrelevant with respect to achieving financial independence.

After visiting different personal finance (PF) blogs It was pretty obvious there were too many definitions which I thought was pretty cool. As I was reading some of them I was thinking, well it might be a good idea to put as many definitions as I can on this post to help you see the different perspectives that are out there. I could go ahead and do that but what if I share the two sources of information that I found most helpful? Call me lazy or not, I’m gonna do it anyways. The two sites I would recommend checking out are esimoney and thinksaveretire. They did a phenomenal job putting together a list of definitions from many bloggers in the PF space. At the end of each article, they nicely wrapped it up sharing their own perspectives and guess what? they were different but by now you know that is Ok.

If we can all agree to disagree on the definition of FI then where do I stand? … well here you go:

I’ve come to the realization that there can be many definitions and no one is right or wrong. Instead, what I have decided to do is to have a definition that makes sense to me which simply boils down to “having options to do what you love and reaching that point (remember the word “state” from Wikipedia?)  in life in which you allow passive sources of income to give you the freedom to enjoy life in a meaningful way”. Whether you love your job or not or would like to do something completely different, is about having that FU money to be free.

There are key elements to reaching financial independence; however, discussing all stages in this post would be a disservice to you. Instead, I plan on taking a step back and setting a logical framework to discuss all aspects of FI.

Until next time … JJ


  1. Hi JJ,

    I also agree that financial independence means something different to everyone. Investing in assets such as Real Estate, stocks, and yourself is key to building wealth. What we do with the freedom we receive from passive income is what defines financial independence for each of us.

    Financial independence is one of my favorite topics ever since I read Rich Dad Poor Dad by Robert Kiyosaki. As I browsed your site I knew that I had to read this post.

    Thanks For Sharing!

    1. Hi Chris, thanks for the kind words and appreciate you stopping by.
      I like your thoughts on FI and couldn’t agree more.
      All the best, JJ

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