Some define financial independence as having enough money to never work again and be able to do whatever they want, no matter the cost. Again, this is a great goal, but the issue is that it’s too lofty and unrealistic. Remember, goals have to be realistic or the goal setter will feel like they’ll never succeed. Frustration then sets in, and the pie-in-the-sky goals are abandoned.
Financial independence: Ability to escape the proverbial rat race
One of the better definitions of financial independence is the ability for one to escape the proverbial “rat race.” Most folks want enough income and assets so that they wouldn’t need to work at their current job; all but a few are only working because they need the money. Many are not doing what they love and are making decisions based on financial reasons rather than personal ones. If they had the ability financially, they would do something different.
People want the freedom to make decisions to better their lives without having to concentrate on the financial constraints. So how can financial independence be achieved?
Life planning process
According to Darren Zagarola, a Certified Financial Planner and CPA with the wealth management firm of EKS Associates in Princeton, NJ, it starts with a plan. The idiom “you can’t get there from here” defines the beginning of the life planning process. There must be a starting point, followed by goals, to get to the ending point. The plan starts with knowing where you are now. Financially, one needs to know his or her cash outflow, and the current and anticipated living expenses. It takes into account investments and protection against risk, as well as estate planning for the next generation.