Financial Independence: How to Craft a Lifestyle Where Work Is Optional

Dreaming of a life beyond the nine-to-five grind?

A big piece of the Two Comma Life is achieving financial independence – which goes beyond just the numbers in your bank account. Knowing the distinction between building wealth and reaching that financial independence is key to building a purposeful and intentional life based on your values.

To help you get started, we’re delving into what financial independence really means, how it differs from being independently wealthy, and some practical steps you can take to get on the path to success.

Independently Wealthy vs. Financially Independent: What’s the Difference?

In the realm of personal finance, the terms “independently wealthy” and “financially independent” are often used interchangeably, but they carry distinct meanings and implications.

Being independently wealthy typically implies that you possess a substantial amount of wealth – which can come from an inheritance, successful business ventures, significant investments, or some other means. It focuses largely on the wealth you have amassed.

Financial independence, however, is more about what you’re doing with that wealth. Often, it’s about having sufficient income streams to cover your living expenses without relying on a traditional job. It’s not necessarily about having a massive amount of wealth but having enough to live comfortably and securely.

We like to prompt our clients to imagine what they’re life would look like if they won the lottery and suddenly had enough money to do everything on their wishlist. The answers to that question are the “financial independence” piece of the puzzle – it’s about reaching the ideal life you envision for yourself, and the peace of mind that comes from knowing you and your loved ones don’t have to worry about money.

How Do Americans Define Financial Independence?

In a 2023 Empower survey, 67% of Americans said achieving the milestone of financial independence was important to them.

When asked to define what that meant to them, the top answers were:

Not needing money from family and friend
Reaching a certain net worth
Being able to contribute to their 401(k)

Many people connect financial independence with the goal of an early retirement – so much so that the movement has been coined “FIRE,” which stands for “Financially Independent, Retired Early.”

Benefits of the F.I.R.E. Lifestyle

The F.I.R.E. lifestyle centers around an early retirement, but financial independence also offers a multitude of benefits that go beyond simply escaping the traditional work grind. Here’s a breakdown of some of the most attractive advantages:

Freedom of Choice: You can prioritize what matters most to you (and have the freedom to let those priorities shift and change). Work part-time, volunteer your skills, or take that long overdue extended trip with loved ones. The choice is yours!
Pursue Passions: Financial independence empowers you to explore your creative side, dedicate time to artistic pursuits, or transform a side hustle into the thriving career you’ve daydreamed about.
Reduced Stress: Peace of mind fuels a fulfilling life! Stress melts away when you’re not constantly worried about unexpected expenses or job instability. This newfound security frees you to focus on what truly matters and live fully.

A survey by the Pew Research Center found that millennials prioritize experiences like travel and spending time with loved ones over owning luxury items more than previous generations. This value shift reflects the growing movement towards people seeking a life filled with meaning and purpose, not just material possessions.

Setting the Foundation for Financial Independence

First, it’s important to understand that financial independence doesn’t magically happen when your bank account hits a certain number. Without a plan in place to maintain that money, it will simply drop lower and lower (similar to how many lottery winners squander their fortunes within a few years).

To ensure you maintain your financial independence, you can:

Set specific goals. What does financial independence look like for you – and what will that realistically cost? Define your desired monthly expenses and calculate the income you’ll need to sustain that life. It might be helpful to journal out this step of the process!
Consult with trusted professionals. Consider seeking guidance from a certified financial advisor to create a personalized plan for your unique situation. A fiduciary – someone who is legally and ethically required to put your best interests first – is a great place to start your search.
Create a realistic savings plan. One of the best ways to stay on track for your savings is to set up automatic deposits into your account when you are paid. This “pay yourself first” approach ensures you’re prioritizing your future and could help reduce any temptations to spend what you planned on saving.
Focus on your income streams. This step is the most important, and perhaps the most difficult. To sustain financial independence, you need money to be coming into your wallet – even if you’ve decided to retire early. Money you earn without actively working (passive income) could include profits from your investments, such as real estate rentals or interest on high-yield savings accounts.

Achieving financial independence is about more than just accumulating wealth; it’s about crafting a life that aligns with your deepest values and desires. By understanding the distinction between building wealth and achieving financial independence, you can set yourself on a path to a life filled with purpose and fulfillment. The steps outlined above – from setting specific goals to creating multiple income streams – provide a practical roadmap you can use to get started.

Find Your Two Comma Life with PrairieView

Want to learn more? Check out our podcast episode about how to become independently wealthy, where hosts Tim Regan and Katie Umland explore how to navigate through the “suck” of building wealth and more strategies for achieving financial independence. Then, connect with our team today for a free consultation.

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