What is the Meaning of Financial Independence?

option-112225_1280-PDThere are many people that read this blog that are striving for financial independence.  Financial Independence is more of a state of mind, than a financial thing.  If you are in the USA, you may consider yourself financially independent as soon as you become an adult.  Others wait until they are not working, are retired and on Social Security.  Lots of people just want to be able to quit the rat race, and enjoy life.  Still others are longing to achieve one of the main things that many people cannot, freedom. 

Having a budget and activity goal is important if you want to be financially independent.  Some people look forward to the days of getting enough passive income to make $40,000 per year.  Some think they only need $30,000.  Some need $100,000.  And Donald Trump could not begin live on a lot more than those measly figures.  Without a solid financial goal and budget in mind, you cannot be financially independent.

Financial Independence Definition


No longer having to get up in the morning and punch a clock is one definition of FI.  Here in the USA, no one has to work.  There are plenty of food shelves to get food, plenty of soup kitchens, plenty of ways to get enough to eat without working.  No one in America is starving to death.  There may be some children who are not being taken care of properly, but adults have many choices if they seek out help.  Having enough food on the table is not the definition of being financially independent.


Having a roof over your head is relative.  If you are in Florida, Hawaii or any other warm state, you can sleep outside.  There are shelters.  There is public housing.  There are bus stops you can sleep in, and there are programs that give you money for rent. If your definition is having a place to stay, you are already there.  Having a place to lay your head at night is not the definition of being financially independent.


Having access to healthcare is important to some, and would be part of being financially independent.  Once again, the USA has free healthcare for people that do not care to work.  You can go to any emergency room, and the hospital has to treat you.  Medicaid is there for low income people.  Even the Affordable Care Act (ACA) provides subsidies for people who cannot pay for healthcare.  Some states have additional programs to help you if you need healthcare.

So, even if you are not working, you have access to food, shelter, and healthcare.  You can get arrested and go to jail and have “Three hots and a cot”.  And healthcare.  People can have this all without working a day in their lives.  Not many people would qualify this as their definition of Financial Independence.  So, Financial Independence is a lot more than just surviving.  It’s a lot more than just making $3,000 to $4,000 per month.  You can get that much in services just by being dependent on the State.  Here is an example.

What are these benefits worth, in Minnesota, per month?

Section 8 3 BR Voucher (includes utilities) $1,270

Free Healthcare $500

Food Allowance $650

Free Legal $15

Free Bus fare $100

A minimum of $30,420.  After tax.  It would be worth a minimum of $32,747 if all you paid was the Social Security tax on the money.  Some people work their entire lives and work until they are old and decrepit and barely achieve that level of income in retirement.  If you are willing to give up choices, you can jump off the rat race and let the State provide for you to a comfortable level.

The one thing you will not have when someone else is providing for you is choice.  The freedom of choice is what sets apart the people that “have enough”, and people that are financially independent.

Freedom of Choice

If you have money, you have choices.  You can eat at McDonalds, or at the Taj Mahal (do they even serve food there?).  If you have a food voucher, you eat at the place the voucher is issued for.  There is no choice.  You may not even get a choice of what you eat.  And it may not taste good.  You may have the option of several grocery stores, but not every item on the shelf is eligible for purchase.

If you want to go on vacation, to Florida, Hawaii, or anywhere in between, you need cash, not an Electronic Benefit Transfer (EBT) card.  You cannot buy an airplane ticket with an EBT card.  You cannot get the latest DVD from Amazon with the EBT card.  And you definitely cannot buy a beer with the EBT card (at least not legally).  So, you slog off to work to give yourself money, so that you will have more choices.

If you have a Section 8 voucher, a jail cell, a bed at a shelter, or a home in a public housing development, you have your housing needs met.  Most people do not want this type of lifestyle.  They want to earn enough to give them choices.  If you are truly FI, you may well decide to sleep on the beach in Maui, but it will be because of the adventure, not because you have to.

So, the freedom to have the choice of where you eat, where you live, and where you get your healthcare is a prime consideration of being financially independent.  It is not all about the money, or the freedom from going to and from a job.
What is your definition of financially independent?


17 Replies to “What is the Meaning of Financial Independence?”

  1. Freedom of choice is what I’m after… Having the ability (and mobility) to do what you want, when you want is something most can only daydream about.

    Maybe not to the size and scale of a Donald Trump or Mark Cuban, but not everyone can achieve that… and it may not even be necessary for you to be happy. Like you mentioned, that’s the importance of having a goal in mind. Find out what you need, and attack it with full force.

    Sleeping on the beach in Maui is quite enjoyable… Miami ain’t too bad right now either!

  2. Nice article. To me, Financial Independence is about taking your life into your own hands. You can either sit on your ass and not work another day for the rest of your life, or you can take up photography, wood working, knitting, whatever makes you truly happy and not worry for a second about where your next meal is coming from, or if you’ll be able to make your next house payment.

    Taking control of your life means taking control of your happiness.

    Happy 2015!

  3. Once we can control our actions in all ways, we forget what it’s like to be told what to do, and we have enough saved to not worry if a check comes in because we planned. Financial freedom is having total control of your life. You must be willing to take lumps in order to get there and you must be confident also, trust your plan and have a good exit strategie.
    I have to say I like the way this blogger gets rent in time. I take a different approach, I go for the underdog who no one else wants to rent too, why because they stay longer. And yes they pay late but I’m always paid. I have a less universal approach and it’s worked. When my bad credit tenants have no one who will rent to them they don’t move often. Is it worth it, yes. Also you must not put druggies and bad credit folks into same categories . It’s easy to ruin credit. Find your nitch in 2015 !

    1. Thank you for the comment!

      It takes hard work, ambition and determination, but anyone in the USA can be a millionaire.

      If you have a lower income rental in a lower income neighborhood, it makes sense to what you are doing. If you are in a decent area, you are cheating yourself with a low quality tenant. Be sure to target your market.

  4. Great comparison between “true” financial independence and relying on the State for benefits. I do think it’s good that we have a social safety net – there are people who have certain health considerations that prevent them from working and/or being a functioning member in society. I realize this “safety net” has been abused, but I personally do not see it as financial independence. I think being able to have consistent passive income is the definition of financial independence.

    1. Thank you for the comment Dave!

      I think there is a big difference too. Far too many people see the definition of FI as not having to go to work. Once they get the minimum, they think they can quit. The truth is, they could have never started the FI journey, if that is all they want.

      Keep working, keep building, and keep the goal in mind. Only then will true FI be achieved with all the rights, benefits and responsibilities thereof.

  5. Financial independence is financial freedom. Freedom to live the life WE choose for ourselves. Being tied down by the limitations imposed by a governmental program is no better than being tied down by the obligations to a job. At least with a job, I can control the rest of my life outside of my working hours. In the end, Mr. Maroon and I are pursuing happiness. Plain and simple. Right now, the obligation to a job does not bring us happiness. So we choose to turn those efforts towards a goal that will allow us to live our lives in the manner we choose to fulfill our desire for happiness.

  6. Always an interesting topic…. I think one of the best things money can buy is choices. Financial independence to me means being able to choose, whether I want to go to work in an office, whether I want to stay put or travel, whether I want to cook or go out to dinner. That means I’ll have to have enough income that doesn’t come from a W2 to afford that lifestyle.

    From my work with Indian Health Services, I can confirm that there are tons of people who have never worked and live entirely off the system. They do have shelter, food, health care, usually even some spending money, but little choice. That’s why we see a fair number of Native American patients in the private practice office. People who have always had to pay for health care often ask why on earth someone would pay when they can get care for free, but in my opinion, free does not have value if you’ve never seen the alternative. I think that’s the reason why so many who get everything for free still complain instead of seeing how lucky they really are. If they were in many other countries, they’d be dead.

    1. Thank you for the comment Kim!

      You see a lot first hand, as I have. Everyone is financially independent from day one, but they have little choices. Saving a bit gives the choices that is necessary for true FI.

  7. The definition of FI to me is being able to do what I want to do, when and where I want to do it. A passive income and a year-round RV lifestyle is my Shangri-La! Love your points. Being on Public Assistance is like being a child. Sure, you may get all of your basic needs met, but if you want a candy bar, you’re still at the mercy of your parents’ say-so.

    1. Thank you for the comment Kay!

      Great points. Just because you have a roof over your head doesn’t mean you are FI. Having the ability to choose, and enough income to do the choosing, makes the world of difference. I too am looking at an RV lifestyle. Not full time, but for several 30+ day trips a year.

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