What is Financial Independence?

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This post answers the question “what is financial independence?” by providing a workable definition for the phrase.

Financial independence, also known as financial freedom, is a concept that has gained significant attention in recent years.

Many individuals are seeking ways to break free from the traditional 9-to-5 grind and attain a level of financial stability that allows them to live life on their own terms.

In this article, we will explore the various aspects of financial independence and provide insights on how you can embark on your own journey towards financial freedom.

What is Financial Independence?

A financially independent person can control their time on his or her own terms. They can do whatever they want to do in their day to day life.

These kinds of people are passionate about what they do and how they are spending their time. They feel excited when they begin working on their project early in the morning.

When you enjoy your work you will not have regret about the time that you are spending on that particular thing. It might be your freelancing work, job or business. Choosing the right kind of work is crucial to becoming financially independent.

History has shown that people who love what they do make a big difference in their life.

In the interview with Steve Jobs, one journalist asked Steve jobs how anyone become successful in business, so Steve jobs replied, and I quote.

“You have to have passion about what you do, or else you will give up. Any rational person who does not have a passion for what they do give up at the end.” – Steve Jobs.

I have completely agreed with this thought. Passion makes you the best in your skill. So find something that makes you happy.

So I hope we answered the question of what is financial independence; but, how to obtain it? Here are some of the tips on how to achieve financial independence:

How to Achieve Financial Independence

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1. Find your passion

Finding your passion will allow you to create a platform that will become your earning source. Passion can be anything that you enjoy the most.

Once you find your passion or niche, note down it on a piece of paper. Some people might find more than one passion. It's ok to have more than one. Note down it on paper and start doing research around your passion.

You have to evaluate the depth of your passion. See what industries are connected to it. How you can earn from it. Note down the amount that people who are already in your field are earning from the same passion. This earning amount will become your ultimate goal.

When you follow your passion, earning becomes fun. You will reach your goal easily by upgrading your skill.

2. Remove distractions from your life

Society around you is filled with unwanted information. Your phone, television, gossip with friends and many other things will come in your path.

You have to avoid any distraction which is not connected to your passion. The ultimate goal is to make you financially independent and be happy with each movement you spend in your life. So these distractions are not on your list so keep them away for a while.

Focusing on your goals will keep you alert when such things try to distract you. When you are aligning yourself with your goals you will see you are not getting involved in unwanted activities. You will be calm and steady towards your goal. This sounds simple enough but it truly works.

3. Upgrading is essential

Once you decide what you want to do in your life, the next step is to upgrade your skill on daily basis.

Yes, you have to work on your skills on daily basis by using free online courses that can teach you anything online:

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Create a habit to spend 5 hours daily on your passions. More than likely, the competition will be high in your field.

If you dedicate most hours to upgrading your skills then you will move faster towards your goals than other people.

It will be challenging at the beginning but once you have a habit of practicing daily, you will improve your skill.

4. Savings and Investments

While focusing on your ultimate goal, you also need to manage your current affairs effectively.

This means spending less on things which are not important and manage your savings properly. Keep a close eye on the things which are taking away your big chunk of money.

If these things are not connected to your basic needs then try to reduce them or stop purchasing them.

There will be many things on your monthly expense list which are not useful. By reducing your expenses, you will save some money that you can invest to earn a good return.

You should focus on reducing the expense and use saved money in long-term investments.

5. Creating an emergency fund

If you are living your life paycheck to paycheck then you will face breakdowns in your life when an emergency occurs.

Always have an emergency fund in backup to avoid colossal failure. If you don't have any fund in backup then your first goal should be creating an emergency fund.

You can't generate huge fund overnight, so it is better you planned for such emergencies. For financial freedom, you need the backup plan.

Misconceptions about Financial Independence

Financial independence is a highly individualized goal, and there are several misconceptions surrounding it that can hinder or misguide individuals on their path. Let's address some of these misconceptions:

1. You don't have to be rich to be financially independent

Contrary to popular belief, financial independence is not exclusively reserved for the wealthy. Many financially independent individuals lead minimalistic or modest lifestyles, maximizing their financial situations without having substantial amounts of money.

It's not about reaching a specific dollar amount, but rather aligning your financial goals with your personal aspirations and dreams.

2. Retirement is not a prerequisite for financial independence

Retirement is often associated with financial independence, but the two are not inherently linked. Achieving financial independence does not necessarily mean you have to stop working altogether.

Many individuals who have reached this stage continue to work on projects they are passionate about, enjoying the freedom to choose meaningful work without the burden of financial obligations.

Financial independence allows for a reduction in financial concerns, but it doesn't necessarily mean complete ignorance of your financial situation.

3. Financial independence doesn't require extreme sacrifices

While financial independence does require careful consideration of your financial situation, it doesn't mean you have to sacrifice your quality of life. Extreme frugality is not the only path to financial independence. It's about finding a balance between saving and enjoying life today.

Lifestyle changes and conscious spending can have a significant impact on your journey to financial independence. You have the flexibility to determine the level of sacrifice that aligns with your personal values and goals.

4. Financial independence is achievable for everyone

Financial independence is a goal that can be pursued by individuals from various backgrounds. However, it is important to recognize that certain privileges, such as a supportive environment and access to opportunities, may make it easier for some individuals to achieve financial independence.

The absence of discriminatory barriers and a stable foundation are factors that can contribute to the feasibility of attaining financial independence. While everyone's journey is unique, it's important to acknowledge the potential obstacles and work towards overcoming them.

Defining Financial Independence

Financial independence is deeply personal and requires careful introspection. It involves aligning your financial decisions with your long-term goals and aspirations.

To help you define your own version of financial independence, consider asking yourself the following questions:

What are your hopes and dreams?

Identifying your hopes and dreams is an essential step in the journey towards financial independence. These aspirations can range from significant life goals like pursuing a new career, starting a family, or building a business, to simpler desires like reconnecting with loved ones or providing a stable environment for your children. Take the time to explore your ambitions and consider how financial independence can help you achieve them.

What would you pursue if money weren't a concern?

Imagine a life where financial constraints were no longer a barrier. What hobbies or interests would you pursue? Reflect on the activities that bring you joy and fulfillment, whether they are related to your career or personal endeavors. Financial independence grants you the freedom to explore these passions, unburdened by financial limitations.

Conclusion

Financial independence is a journey that begins with defining your personal goals and making deliberate choices to align your finances with those aspirations.

By challenging misconceptions, taking actionable steps, and staying committed to your vision, you can pave your own path towards financial freedom.

Remember, the road may not always be easy, but the rewards of financial independence are immeasurable. Start today and embark on a future of financial empowerment.

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About the author

Brian Meiggs
Hi, I'm Brian Meiggs! A personal finance expert, entrepreneur, and the founder of My Millennial Guide. My drive is to help others unlock the wealth of freedom and pave the path to financial success. With my bachelor's degree in finance, I help millennials follow the smart money in order to increase their earning potential and start building wealth for the future. I write regularly about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. I have been quoted in major publications including Business Insider, Yahoo Finance, NASDAQ, Discover, GoDaddy, BiggerPockets, Fox News, Debt.com, Quick Sprout, Money Geek, MSN Money and many more!