Moving from financial independence to financial freedom

Achieving financial independence is the goal of many. With many folks thanking God, it’s Friday and dreading Mondays, achieving financial independence is seen as a ticket to freedom.

• It could be the freedom to quit your job and do your own thing
• Freedom to change to a lower-paying job doing what you really love
• Freedom from fear of losing your job, since you no longer depend solely on your salary etc

Financial independence and financial freedom are often used interchangeably. They may be cousins, but they don’t mean the same thing.

Financial independence

Achieving financial independence means having the ability to sustain your standard of living from a fixed income without working. That means you are able to generate a guaranteed fixed income without having to work. If the income is not guaranteed, it does not fit into your financial independence portfolio. You need guaranteed income to pay your bills and other expenses. If the income is not guaranteed, you can land in financial trouble.

Having financial independence means you have enough to meet your needs, and maybe a little extra (based on your income vs. expenses). You may need to be prudent and plan towards major expenses e.g. tuition fees, rent, car replacement, vacations, etc depending on your chosen standard of living.

Financial freedom

Financial freedom, on the other hand, is operating in the realm of abundance. You have more than enough. You can buy what you want when you want it. There is no need to check your account balance before writing a check or handing over your debit card. You don’t need to delay some expenses for the money to come together, you have more than enough.

Financial freedom is a much higher level of financial independence. Few people ever get here. The skill set required to achieve financial independence is much different from that required to achieve financial freedom. Financial independence is essentially a risk-free zone. You can generate a fixed income while taking zero or minimal risk.

You cannot do this with financial freedom. To move from financial independence to financial freedom, you need to be ready to take calculated risks. The higher the risk the higher the reward. Taking risks is not about being careless, but developing the knowledge and capacity to manage higher risks. The more you know, the less risky the undertaking.

Different mindsets

Achieving financial freedom requires a different mindset compared to achieving financial independence. To play at this level, you need to outgrow your comfort zone. If you do what you have been doing, then you keep getting what you have been getting. To move higher, you need to step higher.

There is no one way to financial freedom. We all need to chart our individual paths. One thing is certain, you need to step out of your comfort zone. The fact that you have tried something and failed a couple of times may not mean that it is not for you. It could mean that you have not learned enough to overcome the obstacles to your success. If you are afraid of failure, you may not be able to access the success you desire and failure is often part of the process to the achievement of success.

As you move from financial independence to financial freedom, you are going where you have not been before, hence will have to do what you have not done before. Don’t be afraid. Learn from your failures and keep on keeping on. Fail forward. There are no guarantees, but if you are on the right path, you will reach your goal. It is only a matter of time.