Financial Independence vs Financial Freedom

Do you want to know how many people in the US have an emergency fund?

“Roughly three in five Americans (61%) say their emergency savings won’t last through the end of the year or that they have already run out of savings, according to the September installment of Clever’s COVID-19 Financial Impact Series. That’s an alarming number, especially since only 18.1% of Americans say they won’t run out of emergency savings.”

What would happen if you lost your job today? Something that I find alarming is that society has made us as employees believe that our job equals stability. That is so far from the truth. We all have an end date with our W2, whether we want to believe it or not. The main difference is whether we chose that date or if our employer chooses it for us. What does freedom mean to you? What does independence mean to you? Although they may seem interchangeable, they are not. Living with consumer debt is not freedom, living paycheck to paycheck is not freedom. Going to a job every day that you strongly dislike is not freedom.

Do you have other sources of income other than your salary to cover basic living expenses? Do you have an emergency fund ready for backup? A savings will eventually run out. To achieve financial independence and financial freedom, you will need multiple streams of passive income. The money that allows you to not stress when you lose a job, the money that allows you to transition from surviving to thriving.

Financial independence occurs when your passive income covers your current lifestyle.

Financial freedom occurs when your passive income covers your ideal lifestyle.

Where to start?

• Start with calculating your financial security number which is your current expenses: this number should come directly from your basic living expenses such as bills, food, and housing.  What is the average amount you spend in this category each month?

• Then, to find your financial independence number add your financial security number plus your "nice to haves". This should reflect your current lifestyle. 

• Finally, once you have your financial independence number, the next step is to add in all of your bucklet list items. All the things you have been wanting to do in life. Create that bucket list and figure out how much each of those things would cost. That will determine your financial freedom number. 

True financial freedom is when you have enough passive income to do all the things on your bucket list. You now control your finances instead of being controlled by them. Passive income is something everyone can create for themselves. Here is an article on how to become a successful passive investor through multifamily investing.

“Someone's sitting in the shade today because someone planted a tree a long time ago.” - Warren Buffett

This quote relates to so many aspects of our lives. It takes so much patience and a lot of time to enjoy everything we have worked for. No one achieves financial freedom overnight, it takes time to grow, just as a tree does.

If you want to learn more about passive investing, join our passive investor club! We would love to chat with you to get to know you and your goals better.

Until next time….

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