Summary:
- Financial independence can mean so many different things to different people
- It evolves as your life changes, what financially independent looks like at 20 years old is very different from 70 years old.
- It’s flexible, and a moving target, but it’s still a great guiding goal.
You’ve probably heard the term ‘financial independence’ before. Maybe you automatically think of retirement when you hear this term, but if you ask 10 different people what it means, you’re likely to get diverse answers. Sometimes even the same person will have a different answer at different points in their life. Let’s talk about what financial independence can mean.
The First Taste of Financial Independence
For many people, their earliest encounter with financial independence has nothing to do with retirement, it’s simpler than that. It’s the first time you cover your own rent for an apartment or house, make your own grocery list, and buy your own furniture (okay maybe some of the furniture is hand-me-down, but that doesn’t take away from this milestone!).
At this stage of life you’re finding your financial footing, and your goals related to financial independence might feel small compared to somebody approaching retirement. But if your car needs repair and you don’t need to call mom and dad to cover the expense, that’s a huge win and a step in the right direction toward financial independence.
Flexibility and Autonomy
After you’ve mastered the basics of surviving on your own, life evolves and independence might start to mean something different for you. One way this shows up is by making goals related to flexibility, both in your career and in your relationships.
Maybe you need the ability to take unexpected time off from work to stay home with sick kids, without that decision wrecking this month’s budget. Maybe you want to be able to prioritize a vacation to spend quality time with your spouse. Maybe you’ve put in years of work at one company and are ready to try something new. If your financial plan can absorb any of these pivots, you are enjoying some financial independence!
FIRE!
There’s a recent trend called FIRE, which stands for Financial Independence, Retire Early. It’s the idea of building enough wealth early in your life so that work becomes optional years before the ‘typical’ mid-sixties goal.
This isn’t necessarily tied to age or quitting work though! One example that has nothing to do with retirement might be a 38 year old who pays off their mortgage early so that in the event of a layoff or a voluntary career pivot they aren’t financially burdened. We’ve also seen people with enough saved to retire whenever they want to, but they love their work! It’s not necessarily about never working again, it’s about having the option to step away if you want or need.
Aging
As we age, considerations about independence become literal. There are financial considerations that play a significant role in decisions related to aging, but thoughts of independence become very practical as we get older. Mobility, day-to-day activities, and the ability to live independently are realities we all need to consider eventually. Financially, being able to pay for long term care services may create more independence as we age.
More than Money
Financial independence goes beyond the numbers, it’s also a feeling of confidence. There are moments throughout life that are financial independence milestones, big and small!
- Buying your first home, trading that starter home for your dream house, eventually paying off your mortgage
- Not flinching at the cost of eggs, or gas, or other necessities and goods
- Taking your dog or cat to the vet without worrying about how much it will cost
- Booking a short-notice flight to visit a long-distance family member or friend
- Replacing a computer, hot water heater, or other appliance without stress
- Paying off debt like a car payment or student loans
- And so much more.
The Bottom Line
Financial independence shows up at every stage of life, and it means so much more than retirement. If you’re not sure what financial independence could look like for you at your current stage of life, that’s the type of conversation we love having.