It is not uncommon to use the terms ‘financial freedom’ and ‘financial independence’ interchangeably. It is a disservice to both. There is an important difference I have realised.
Financial Freedom
is a state of mind where you decide to not let money stand in the way of what decisions you make. There is a certain consciousness, an awareness of what’s important to you.
You go about decluttering and simplifying your life and building it with ‘what is important to you and your family‘.
Yes, you still have that home loan and kids going to school, but when you see an opportunity that can give you slightly less money but more happiness, more time with family, you decide to go for it.
You don’t go about upgrading your lifestyle, beyond a point, just because you have more money. The bigger car is not important and the 2BHK is enough for the family.
Financial Independence
on the other hand, is having enough money to not wake up another day for finding more of it. You can decide to whatever you want, without the money worry at the back of your mind.
Go a world tour, work with social organisations, have long lunches with friends or spend time to write your blog/book. Your portfolio, your wealth is enough to provide your day to day expenses or any other requirements.
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Freedom is inside you, independence is outside of you.
Quite interestingly, financial freedom is more important than independence. In fact, freedom has to happen before independence.
The freedom mindset is what allows you to reach your independence. It helps you get off the hedonic treadmill.
Wealth is not about having a lot of money, it is about having a lot of options.
Chris Rock
When I see it this way, I believe I am financially free.
What about you?
Do share your thoughts.
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References
- Wealth Clarifies by Rational Walk
- A Video on the difference by Big Think
- Goal-based planning
