Is Financial Independence The ULTIMATE Enabler Of A Wealthy Life?

Financial Independence Retire Early (FIRE) may be a term you have heard in the past. The FIRE movement gained some following and popularity in the early 2010’s according to the Wikipedia post. There are a lot of definitions of Financial Independence and each of them vary depending on who you listen to. Some say Financial Independence is a lifestyle choice, some say its an investing philosophy. Regardless of the definition of Financial Independence, the interesting part of it is the link it may have to an alternative path of life that was talked about in the previous post ‘Work, Money & Wealth: Is our approach to a Wealthy Life flawed?’

In that post, we explored the norm of how most of us learn and work for about 50 to 65 years of our lives to generate the money required to live how we want to. The challenge with this normal path of life is the percentage of our lives that we spend working for money, usually 40 or more hours a week. Although this does enable us to make the money to live the lives we want, we often don’t have the time to actually live the lives we want or do the things that we love, as we are busy working for the money. So goes the vicious circle, often referred to as the rat race.

If we had financial independence, by definition we would not be dependent on money, which in turn would mean that we would not be dependent on working for money. If we were not spending most of our lives working for money, then we could actually live life as we wanted to throughout our lives, not just in our retirement years. So perhaps Financial Independence is the answer here. But what exactly does Financial Independence mean and most importantly how do we get one of these, as it sounds like something we all need!

Financial Independence is quite a self explanatory term really, its not as complicated as it can be made out to be. Simply put, you are Financially Independent if you make enough passive income to pay the bills and live off. The next question that arises then is, what is passive income. Well that is money that you make without having to exchange your time for the money. As with most jobs or even small businesses, we get paid money in exchange for our time on the job or small business. Passive income is money coming in through other means, where you don’t have to be putting in a set amount of your time.

To be clear, most passive income is not completely passive, contrary to what a lot of people believe. You do most often than not have to spend some time on any kind of passive income source. But you don’t have to spend a set time on a regular basis on a passive income source like you would in a job as an example. In a job, you have to work for say 40 hours a week, regardless of if you work from home or you go to an office or business premises. An example of a passive income source could be dividends from shares or income from a rental property, which does not require you attention or time for 40 hours a week. You may have to spend some admin time now and then to maintain the shares or rental property but it does not expect your daily attention generally.

So true financial independence can only be declared really speaking if you are truly not dependent someone else for income to pay for your lifestyle expenses. Wikipedia defines it as ‘the status of having enough income or wealth sufficient to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others’ it also talks about another interesting point ‘ Others define financial independence differently according to their own goals’. That last statement is quite an important one as financial independence can mean different things to different people. Some may want to be completely work free, sitting on a beach for the rest of their days. Others may want flexibility to work on passion projects or take up some employment on their own terms (part time or when they want to). So Financial Independence can be seen in many lights but the fundamental is not being dependant on others or something to pay for your lifestyle.

In order to answer the question above, its probably time to define what is meant by a Wealthy Life. Asking the oracle of all knowledge (google) for the definition of a Wealthy Life shows a definition by the Merriam-Webster dictionary. It says ‘having wealth : very affluent’ or ‘characterized by abundance’. These definitions seem to be more oriented towards qualifying a Wealthy Life in terms of Money, Abundance & Wealth. The Wealthy Life we refer to in the context of our blogs is a bit different. Its not just about Money, Finance, Abundance and Wealth, we are talking about a meaningful and fuller life.

The reality is that you can have all the money and wealth in the world but may not really have a meaningful, fulfilling and enriched life. Money and Wealth can enable that but is certainly not the definition, according to our humble opinions. As a practical example, a person living a Wealthy Life can be one who is able to spend time with kids or family members or a passion hobby whenever the need arises, without having to plan for it with leave from a job or business or without asking for permission from a boss.

So to be able to live a Wealthy Life (as we see it), you have to have a level of Financial Independence to have the ability to choose and define the time that you spend on the things that you like to spend your time on. As much a we don’t quite agree, its money that generally keeps us from doing what we want, when we want. So if you take away that dependence on money, you CAN do what you want when you want. And that my friends, is enabled by being Financially Independent!

So we may have found that silver lining to a different path to our Wealthy Lives and that is not being dependant on finance or money in terms of of your own time. And this silver lining may well be the way to not have to spend 50 to 65 years of our lives to generate the money required to live how we want to. If we have financial independence, we can, in theory, live how we want to now. So the next logical question is, how does one get one of these Financial Independence things…or maybe two or three of them! That is the subject of our next post ‘What Exactly Is Financial Independence and How can I achieve it?’