Financial independence, freedom, and security are all important to your FIRE goals, yet for very different reasons. While being financially independent gives you everything you need to avoid the 9-5 rate race, you may need to rethink how to achieve financial freedom – something that is based on your unique retirement dreams.
Financial Independence = passive income + assets that cover 100% of expenses = basic retirement.
Financial Freedom = Financial Independence + ability to avoid debt when buying things + can afford the “extras” like travel, hobbies, pet-projects, etc = retired without fear of buying things and doing what you love doing.
Financial Security = Enough savings to cover any financial “storm” or unexpected expenses (medical bills, emergencies, etc) without concern for it ruining your FIRE status = retired and never looking back!
Milestones to Achieving Financial Independence:
- Pay off ALL debt
- Have Emergency Savings (ideally 12 months worth of expenses – so unexpected expenses or job loss won’t derail your FIRE goals!)
- Save Early and Contribute Regularly to Retirement Fund(s)
- Get Passive Income (stocks, bonds, real estate, or other)
Milestones to Achieving Financial Freedom:
- Have Multiple Revenue Streams
- Actively Investing BEYOND What’s Needed to Retire
- Increase Your Net Worth (higher income, lower debt)
How to Begin: Important Additional Action Steps
- Earn more than you spend…and invest
- Set a budget…and stick to it!
- Know your goals and remind yourself of them often = stay motivated and focused
Finally, remember to ask yourself these important questions and make a detailed plan:
WHY do you want to be in the FIRE movement?
WHAT expenses do you need covered in order to be financially free?
HOW much money will you need and, therefore, how long will it take to achieve your FIRE goals?
Read the full article for more details and helpful links:
https://www.clevergirlfinance.com/financial-freedom-vs-financial-independence/