Many of us believe the myth that financial independence means having a lot of money and assets. We tend to focus only on earnings and the so-called wealth build-up. But have we ever asked ourselves what really wealth is? Is not wealth just having the money to support our needs at any given time? If we believe in this, then we could be financially independent without having very many cash. If our chosen needs are modest, then all we need is a modest level of earning assets and we would be financially independent!
Financial independence is simply having the means to maintain the lifestyle we choose to have without having to actively work. It is the state of economic well-being where our personal investments or savings are generating passive income enough to cover our expenses consistent with the level and kind of lifestyle we want.
Passive or investment income is key to financial independence. Without that income, we will never achieve financial success.
Like for instance, as an employee, our monthly pay allows us to have a certain level of lifestyle right now. If we are to become financially independent, we must accumulate earning assets and/or investments that will generate earnings that will allow us to maintain our current level of lifestyle by the time we retire.
In another sense, we become financially independent when we reach the point where we stop working and yet we can provide our basic needs. This means that our passive income, or the money we earn through our assets and investments are sufficient to provide for our daily needs such as food, shelter, clothing, education of our children, medical expenses, and even some luxuries.
Financial independence can be achieved at any stage of our lives at any age. We just need to plan for it. We do not need to wait to become old enough before we can achieve financial independence.
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