What is Financial Freedom ? [Just about Money]

Freedom is within the nature of humans, by design. Who doesn’t want to be free? Freedom is a cherished word all over the world be it Political or Economic or for that matter with respect to any other realm.

When it comes to the world of wealth, its significance is much more, given the money-driven world that we’re living in.

Many people aspire to become financially independent and would like to live life without worrying too much about money. But it depends on what exactly each person understands about being Financially Free.

In this context, knowing about what is freedom and in particular financial freedom becomes a necessity.

What is Financial Freedom?

Freedom means being free from limitations or boundaries. Usually, we are restricted or constrained in many aspects of our lives. We are confined to a particular place when we want to be a traveler and explore the world. Debts draw us to work (or) employment when we want to study.

Our economic needs push us to be an employee when our interest is into entrepreneurship. These are few instances only but we can see many more such examples in our day to day lives. 

Let we hypothetically assume that all of a sudden today if we stop our active engagement with the income-earning activity.  Let’s say a job, business, farming, etc.

For how long will we be able to sustain ourselves, following a regular lifestyle without compromising on standard of living? Maybe a year or two for a few, could be a few months for some, or it could be even just a single day for many.

Once this duration is over, it gets difficult for us to live with the same lifestyle and the same comforts that we enjoyed earlier when we were working on a particular income-earning venture. Day by day our quality of life gets deteriorated and our financial needs pull us into a downward spiral.  

Living in an inter-dependent economic system that is revolving around money, it becomes necessary to earn and do some activity that earns. And this necessity to earn becomes a barrier that stands between our passion to live a life free of restrictions and our need-oriented ecosystem.

When we clear such restrictions by removing our need for money through setting up an automated system that earns us consistent income, without actively involving, much of our time or effort or money, then it’s called Financial Freedom. 

To put it simply, the ability to sustain our regular lifestyle without us actively being engaged in our regular income-earning activity like employment, business, etc. for our remaining lifetime is called Financial Freedom. The day we achieved it, we can claim ourselves to be financially free.

Financial Freedom and its Attributes

There are a few attributes that can indicate if a person is financially free or not. Zero Liabilities, Established Assets, sustainable Income from the Assets, and Income more than the regular Expenditure for a particular duration. 

In a Financially Free system, one will have zero liabilities and have already created quality assets, which are enough for generating revenues to meet their average daily life expenditure. Further, the income earned through assets will be more than the expenditure incurred or consumption for that person, in the same duration. And this difference of excess will be reinvested into assets. This results in assets getting compounded with part of it going under consumption and part for re-investing. This is a cycle and hence it can be called a sustainable one.

assets –> income from assets –> consumption + re-investing ( into assets, ensures sustainability)

Explore the World

The emphasis is to get rid of liabilities and create quality assets that would provide a sustainable income. This sustainable income is one that unlocks or removes the restrictions that a person might be living through. This income will drive the person to meet the regular expenditure which in turn drives us towards pursuing our passion. 

Financial Freedom is not just about understanding the economic dependence that we have within society but also unlocks our true potential by enabling us to pursue our passions.

It is this freedom that can bring creativity out of a person and add value to the self and society. Like a free Albatross that wanders across the seas without fear, Financial Freedom can give us the wings to explore the world in all our abilities.