There seems to be some confusion in the blogosphere about what it means to be financially independent. I have seen many blogs and articles talking about financial independence that have different definitions of it. Some I agree with others I don’t.
Let’s look at the definition of financial independence.
Here is the definition from Wikipedia .
Hubby and I are financially independent. It means to us that we have enough money from investments and other passive income to be able to pay all of our expenses for the rest of our lives without working jobs.
To some people it means being self employed and making enough money to pay all of their expenses. Others believe that they are financially independent if one spouse is self employed and the other works for someone else.
I know there are many, many more definitions. But which one is the right one? Perhaps there isn’t a right one. Perhaps it depends on what each of you think it is.
I’ve been around so many decades that I don’t even count them anymore. But I was raised to believe that you became financially independent when you retired. That retirement came when you turned 65. We didn’t like the idea of retiring at 65, so we set up our life goals so that we could retire 10 years earlier than that. We could have set it up for much earlier but our children would not have been able to attend private schools and go to college. Those goals were more important to us than retiring earlier.
Our life goals for financial independence were achieved through saving, frugality, investing, and setting up other streams of passive income.
Hubby was self employed as a consulting engineer for less than a year after he was done with his career jobs. He quickly realized that he had retired to enjoy life not do consulting work. Most of his working career was spent doing two different jobs. I worked part time and full time jobs for less than 17 years. Most of my work was done while my children were in junior high, high school, and college.
Now we are in our 17th year of financial independence and have not had one thought about self employment or even taking a part time job. We have plenty to do each day and we are never bored. But most importantly our planning and working has paid off. We are free from work.
So our definition of financial independence is the same as our definition of financial freedom. Never having to work again because our money pays our expenses year after year. By not working we control our own lives. We don’t have a boss telling us what to do each day. I totally agree with Wikipedia.
I am very curious. What is your definition of financial independence? Are you working towards it? Or have you already achieved it? Please leave a comment and share with all of us.
9 replies on “What is Financial Independence?”
Mine will be in one more year when all of my debts will be paid(outside of utilities, taxes and insurances) and I will be able to bank more than just my 401k and Roth. When I can work and not worry about paying the last of this then I will be free. Never again will I be a dlave to a lender
It's a lot of hard work but it looks like you are getting there. Congrats!
I agree with your definition of financial independence. But sometimes people have" technically "achieved it, and still choose to continue working. I was a stay at home mom, my husband has a good income as a physician. He could have retired a few years ago but continues to work. I think it is because he has a choice and enjoys his career, that he continues. He also is in line to receive a pension, but if he puts in a few more years, the pension almost doubles– that is his big motivator at this point (as long as he stays healthy!). Thanks for your blog-very enjoyable Sherri
Thanks for sharing. It was very interesting. I don't blame him on staying if he loves it and for that doubled pension.
Hi Liz, this is Chris. I guess my definition of financial independence would be when we retire, not having to work a job. We are working towards my dh being able to retire when he is 65. I wish he would be able to retire earlier, but health care is an issue since we wouldn't be old enough for Medicare yet and he doesn't have retiree health insurance from anywhere he worked. We have not achieved financial independence but are working hard to be ready at 65. Our only debt is our mortgage and we have been saving for a long time in his 401k.
Healthcare is a huge cost without insurance. I understand not being able to retire until you can get Medicare and can pick up a Medicare Advantage Plan for the other 20% that Medicare does not pay. It costs us enough out of pocket for health care insurance and paying dental bills. Congrats on paying down that mortgage and saving for retirement.
I "lost" your blog for awhile and am so glad I was looking back through some of my previous posts and replies and found you again. 🙂
My husband and I would love to be financially independent, but we made financial mistakes along the way, life threw us some curveballs and we also made some deliberate choices to forgo an income from me so I could stay home with the kids and homeschool them for 9 years. Heath insurance is a big factor for us in not being able to have my hubby come home. We depend on his income and the fact that his health insurance is provided as part of his pay package through his employer. His employer is also wonderful to allow spouses and minor children to buy insurance through the group plan that company is part of. My health insurance is just a tad under $500 a month. We have no retirement funds set aside due to my getting ill and not being able to go back to work full time as planned. I now cannot even work part time at this point so my hubby shoulders all the financial responsibility. I wish things were different, but they are what they are.
Medical issues and medical insurance are some of the biggest issues when it comes to be financially independent. We were lucky to be able to stay in the group plan that we were in before retirement so premiums are a little easier.
I understand staying home with kids. I did that too. Forgoing those early years income to be home with your children plays a big part in how fast you can become financially independent. But is was worth every penny of lost income. I always looked at it as saving more income than we lost because of all of the expenses we didn't have to pay because I worked.
Everyone does the best they can with what they have to deal with. I wish you could get rid of the fibro but my sister has it and I know there seems to be no cure.
Wow! You've done well financially. Good for you and hubby.