For many, financial independence and financial freedom are the same things. But it’s safe to say that most of those thinking like that are quite far from achieving any of the aforementioned statuses.
Overall, one couldn’t say they know exactly what financial freedom is all about until they experience it. On the other hand, financial independence is something most, if not all of us experience throughout our lives, especially from the moment we get our hands on a high-paying job.
Without any further ado, let’s take a look at the differences between financial freedom and financial independence and at why one should always aim for financial freedom.
What is Financial Independence?
Being financially independent means having the ability to live off your salary or income while also being able to save some money in a savings account. The last part is not mandatory, and some would argue if savings were actually part of one’s financial independence.
For us, a decent savings account – or the ability to feed it monthly – is quite important, especially in these uncertain days of the pandemic. Ultimately, being able to set some money aside (for either health or pleasure) is an important aspect of financial independence.
Obviously, some years ago, being financially independent meant that you didn’t have to work again for the rest of your life and that all your income is earned passively. Slowly, this definition changed in the minds of people, mainly due to the drastic differences between the rich and the medium-income class.
The Benefits of Financial Independence
Financial independence, as described above, can’t really make for a fulfilling life. In the vision of today’s people, while being financially independent is a nice feeling, it doesn’t help when it comes to buying a house or a car.
In other words, this type of independence gives you the possibility to apply for a massive loan and then, naturally, be stuck with it for the next 30 years (at most). A high-paying job and the ability to save money at the end of the month, don’t amount to financial freedom.
Instead, these two aspects make you independent enough to be able to get a mortgage or a car loan without having to worry that you’ll run out of month at the end of your money. But this is not financial freedom for many of us.
What is Financial Freedom
Being financially free, now means what financial independence used to mean. Basically, you don’t have to worry about how much work you get done or you get at all since you’re already set for life.
For example, traders are one of the classes of people that try to achieve this freedom.
Obviously, a lot of hard work is required, but wise trading can help you get more income in much less time. This is one of the keys to financial freedom. The other one is, as mentioned, the ability to earn money passively.
The Benefits of Financial Freedom
One benefit alone can sum up the entire concept of financial freedom. Namely, the fact that financially free people can afford to spend an entire year abroad, traveling, without having to worry about funds and finances.
But this doesn’t always mean that those people have huge amounts of money at their disposal. In most cases, it means they played their investments right and are now making a certain income every month without having to constantly check their bank accounts.
For example, real estate investors that have as little as two properties in key areas can rake in more than $4k per month from rent and such. The same applies to investors that play the stock market or artists of various kinds.
Ultimately, one could say that the benefits of financial freedom are directly proportional to the risks and hard work one has put in previously. If you’re playing your nine-to-five job with no dreams and aspirations, financial freedom is and will remain a myth for you.
Why Financial Freedom is Different from Financial Independence?
As mentioned, a quick Google search will show that these two terms mean basically the same thing. At the same time, you never hear someone who is financially independent saying that they’re financially free. This is due to mentality, first of all, then to the way companies make us perceive finances and, lastly, to the way the top 1% of the world describe their lives to the rest of us.
This is because most of us have become aware of the fact that independence doesn’t translate to having no worries. Freedom, on the other hand, still keeps its true meaning and many people are afraid of using the word in describing their own circumstances.
Others, those leaning towards conspiracy theories, could say that the term financial independence has lost its true meaning, with the help of mega-corporations that did their best to normalize a 9-t0-5 life that comes with apparently no major benefits for the hard-working masses.
The Bottom Line
There is much more that can be said about finances. When talking about either freedom or independence, it’s extremely difficult to say how people perceive or, better said, should perceive them.
Your financial independence may very well be someone else’s financial freedom. At the same time, your freedom can very well be regarded as poverty by the top 1%. As a result, in the end, financial independence and freedom are largely subjective terms, but still vastly different.
Independence implies finding a comfortable area where one makes enough money to afford the more expensive things in life without having to sacrifice health, public services, etc. Freedom implies leaving that area, maybe suffering financially for a couple of years, but ending up affording the most expensive things in life with no worries whatsoever.