Financial Independence vs Financial Freedom with airplane wing
Financial Freedom vs. Financial Independence: How They’re Different, And How You Can Get There
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    Google the term “financial freedom,” and you’ll find that, often, financial freedom and financial independence are used interchangeably. But are they indeed one and the same?

    Think of a young child. When a toddler first learns to walk, they achieve some level of mobile independence. They no longer need adults to carry them to get from point A to point B. They can get up and knock that cup off the coffee table just fine by themselves now, thank you very much.

    However, even as toddlers gain their mobile independence bit by bit, any parent can tell you about the whines of “I’m tiiiiired” on long walks. This suggests that, though the child has mastered the basics of mobility, they can’t go everywhere by themselves.

    Hence, they haven’t achieved full mobile FREEDOM just yet. We’ll revisit when that child is getting their driver’s license. 😉

    The same basic framework applies to finances. Many people start out working toward achieving financial independence, which is a milestone on the path toward total financial freedom.

    Let’s take a closer look at financial freedom vs. financial independence, where you are on the path, your financial goals, and how to achieve financial freedom through investing in real estate.

    Financial Freedom vs. Financial Independence

    Let’s take the toddler who’s learning to walk, and apply that to your finances. Are you at a point in your life where you’ve become mobile, so to speak? Can you go anywhere you want? Or are you living paycheck to paycheck?

    Think about it this way. What would happen to your life if you were to lose your job today? Would you still have enough income via sources other than your salary to cover your basic living expenses? Do you have an emergency fund ready as a backup? How about enough income to indefinitely fund your current lifestyle?

    And yes, I’m talking about income, not savings. Savings will run out sooner or later, but ongoing passive income will last you indefinitely. The income you receive from your job is active income. In order to obtain financial independence and financial freedom, you will need multiple streams of passive income, the kind of money you make while you sleep.

    No one achieves financial freedom or early retirement overnight. It’s a process, and there are many milestones along the journey.

    Milestone #1 – Financial Security

    Financial Security Definition: Generating enough via passive income to cover your basic living expenses

    If you lost or quit your job today but still had enough income coming in through other sources to cover your basic living expenses (e.g., food, shelter, clothing), then you would be financially secure.

    Sure, you might have an emergency fund that could cover your expenses for a month or two. But what about when that money runs dry and you still haven’t landed a job? This is why additional sources of income are absolutely critical.

    Financial security is the first rung on the ladder to achieving financial freedom and early retirement. Financial security gives you the confidence in knowing that, even if you were to lose your job today, you could still cover all your essential expenses, without reaching out to mom and dad for a loan.

    Milestone #2 – Financial Independence

    Financial Independence Definition: Generating enough via passive income to cover your current lifestyle

    What does financial independence mean? If you had enough passive income to fully cover your current lifestyle, including all the little extras beyond the bare basics that you currently enjoy (e.g., that latte you get every morning, your Amazon Prime membership, the family trips you take a few times a year), then you would be considered financially independent.

    Being financially independent means that you could retire early and continue living your current life without ever having to work again. In order to be financially independent, you must build multiple streams of income. This allows you to continue earning income regardless of what you choose to do day-to-day.

    Milestone #3 – Financial Freedom

    Financial Freedom Definition: Generating enough via passive income to cover your ideal lifestyle

    Many people stop at financial independence. But what if we were to take it one step further? Maybe just being financially independent isn’t enough for you. You want to experience true financial freedom – the pinnacle of financial success.

    True financial freedom means that your passive income could cover not just your current lifestyle, but the lifestyle you’ve always dreamed of. Flying first class every time. Getting that ocean-view suite. Splurging on those front row seats.

    This is true financial freedom. Financial freedom means you have enough passive income to do all the things, without having to worry about where the money is coming from.

    Once your finances allow you to go anywhere and do anything you want, without you having to work for it or worry about it, you will truly be financially free, meaning you can live your ideal life without having to work another day of your life.

    Your Path To Being Financially Free

    For a full run down on how to become financially free, head over to our Achieving Financial Freedom in 2024: How to Be Financially Free. Learn about investment opportunities that provide you with a source of passive income, such as investing in real estate syndications, and learn how to reap the rewards of financial freedom.

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    Annie Dickerson

    Annie Dickerson

    Annie Dickerson is an award-winning real estate investing expert with 15+ years of real estate investing experience. Annie is the Founder & Chief Brand Officer of Goodegg Investments – an award-winning boutique real estate investment firm.

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