Financial Independence vs Financial Freedom

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  • Financial Independence vs Financial Freedom
Author: Joseph Reinke, CFA

Financial independence vs financial freedom is argued over and over again on blogs, podcast, videos, etc… However, most of it is noise that you can ignore.

All you need to know is that one is tangible and the other is intangible.  One you should care about, the other one you shouldn’t.

Below I compare and contrast financial independence vs financial freedom and highlight which one you should strive for.

What Is Financial Independence?

Financial independence focuses on tangible assets and tangible income.  This means how much you have saved and how much those assets produce in income.

Most of the time financial independence is based on an arbitrary number that really doesn’t mean much.  For example, if you save $1 million and live by the 4% rule, then you can retire…

In my opinion, financial independence is a myth.  In short, when it comes to financial independence, much if not all of it is out of your control because you can’t control investment rates of return or cost of living.

If something is out of your control, by definition you are dependent on something else.

What Is Financial Freedom?

Financial freedom is focused on intangibles.  We have a saying at FitBUX: “make money complement your life not dictate it.” That is the goal of financial freedom.

Financial freedom reduces your stress and anxiety about money based on your knowledge of money, systems you follow, and the reduced amount of time you need to spend focusing on money.

When you are financially free, you have zero to no stress related to finances because you have the tools both mentally and physically to access situations and make decisions.

This doesn’t mean you have to be financial expert to be financially free.

You just have to have a basic understanding of how to organize your money, develop a plan that looks at both long-term and short-term impacts, and be able to implement your plan in a way that doesn’t take hours of your life every week.

All the items mentioned above in regards to financial freedom are in your control!  If you want step-by-step guidance be sure to read how to achieve financial freedom.

Which Should You Pursue?

That is financial independence vs financial freedom in a nutshell, i.e. financial independence is made up of items out of your control. Therefore, I say it’s a myth.

Financial freedom consists of items you control. Thus, your goal should be to pursue financial freedom at all times.

If you pursue financial freedom, financial independence will come.

However, I know a lot of people that pursued financial independence and they are the most financially stressed out people I’ve meet.  If you have millions of dollars but are still stressed out of your mind, how you are financially free!

If you need help pursuing financial freedom, be sure to check out our new financial planning technology.  It organizes your money, allows you to build and simulate financial plans, then track your progress with ease. Plus, if you want your questions answered, you can chat with a FitBUX Coach!

By Joseph Reinke, CFA

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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