Different Ways To Define Financial Independence

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Whether you call it Financial Independence or Financial Freedom, the first step to achieving autonomy is by defining it.

If you Google this term, you will find that there is an abundance of definitions available. However, let us focus on these four:


The most common definition of Financial Independence relates to cash flow. Many experts accept the idea that it is the “state of having sufficient personal wealth to live, without having to work actively for basic necessities.” Simply put, you passive income is able to cover your living expenses. Passive income sources include rental property, royalties from intellectual properties (e.g., books), trust funds, online business, investments, and pension plan.

Quantify your progress by calculating the percentage of living expenses that your passive income covers. When you reach 100% then, you attained Financial Independence by this definition. Having a full-time job is certainly optional with this circumstance!


For many people, Financial Independence is achieved once they can use their money to banish their stress. These people focus more on what they can accomplish – in the terms of minimizing the “gap”. The gap that I am referring to is the division that exists between your income and your spending.

By this definition, you can increase the gap and reach Financial Independence quicker by spending less and earning more.


Financial Independence is characterized by being off the debt latch. While some debts are necessary and can be easily paid off, others are unplanned and difficult to pay off. Eliminating the latter is a crucial step to gaining financial freedom.

There are numerous ways to minimize your debts and build a better relationship with money, learn some of them by checking out our helpful posts, here.


A refreshing definition of Financial Independence is shared by Investopedia. Its contributor believes that Financial Independence “should mean the ability to live more or less as one wants to, within reasonable limits.”

Financial Independence can be seen as being able to do and choose the path that you desire the most. Absolute autonomy mean not always be synonymous early retirement as it can refer to your power to quit a horrible job.

Image Credits: pixabay.com

Image Credits: pixabay.com

In my opinion, this is the most achievable definition among the four.

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