What is Financial Independence?

By Jackie Lam
April 25, 2018
Chime is a financial technology company. Banking services provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC

Stepping away from a job you hate. Deciding to work on your passion business instead of taking on more clients. Being able to pay for an unexpected expense.

What do all these things have in common? If you’ve reached financial freedom, you have the resources to do all the above. That’s because financial freedom gives you-you guessed it—options.

Financial independence is desired by many and doesn’t come easy. It takes a lot of planning and effort to achieve. It can also mean different things to different people. And, because there isn’t just one definition or approach to achieving financial freedom, we asked some of our favorite money nerds to tell us what it means to them. Take a look:

The Power to Say “No”

For digital publisher Oz Chen, financial independence means the ability to decline client work so he can focus his creative energies elsewhere. Chen, who transitioned from being a UX designer to a solopreneur two years ago, now does what he truly enjoys: he writes and creates online courses.

“Because I’m not in such a reactive state, where I have to take a job because I need the money, I can focus on more self-directed work,” says Chen.

“I went from feeling like I needed to constantly add to my portfolio to recognizing that I didn’t need to take this particular job opportunity right now.”

Doing the Things You Love Without Stress

For Jackie Beck, having financial independence means being able to do the things you love without worry, stress, or being financially beholden to others.

“I knew my husband and I reached financial independence the day my husband got laid off, and my first thoughts were along the lines of, ‘Well, OK. He’ll find something he enjoys more. Meanwhile…we can take that trip we’ve been thinking of,” says Beck, creator of the award-winning app Pay Off Debt by Jackie Beck.

At that point, Beck and her husband had paid off all their debt, including the mortgage on their house. They had also built up savings and investments.

For those who aspire to be financially free, Beck recommends focusing on your end-goal.

“When you want something badly enough, it’s a whole lot easier to do the things it takes to get there,” says Beck. “That typically starts with only spending money you already have, building savings, and paying off existing debt.”

The Ability to Create a Life You Want Right Now

For Emily Guy Birken, financial independence is all about designing a life of your own accord.

“I say ‘a life you want’ rather than ‘the life you want’ because it’s very easy to get stuck thinking that the only way to feel happy and fulfilled is to have it all—Warren Buffett-level wealth, a dream job, the ability to travel the world at the drop of a hat, etc.,” explains Guy Birken, freelance writer and author of End Financial Stress Now.

Guy Birken knew she had achieved financial freedom when she felt perfectly comfortable turning down freelance jobs that didn’t interest her.

“When I first started freelancing, I definitely fell into the common trap of worrying that turning down any job would lead to all of my clients drying up,” says Guy Birken, who has been freelancing for seven years.

“Once I got to a place where I knew I could financially handle slow months and did not have to feel lucky to accept jobs I didn’t like, I knew that I had achieved financial independence.”

When Money Goes Beyond Taking Care of Your Needs

For Eric L. Patrick, financial freedom means being in complete control of your money. In his worldview, this means you’ve reached the point where money can take care of your needs as well as help you achieve your wants and desires.

“I know I’ll have achieved it when my expenses are as low as they can possibly be through sound budgeting; my debt payoff is decreasing exponentially, and I have the cash flow to participate in money-growing opportunities such as investing and starting a business,” explains Patrick, founder & hip-hop stock doc at Black Market Exchange.

“All of these things will be happening without my quality of life taking a major hit.”

When You Manage Your Finances to Optimize Your Happiness

“To me, the more financial freedom you gain in your life, the more you can make decisions to optimize for happiness, and not money,” says R.J. Weiss, a CFP® and blogger at The Ways to Wealth.

While you’re on this journey, Weiss says it’s perfectly OK to start small.

“The most important thing is getting started,” says Weiss.

A good example is to start increasing your 401(k) contribution rate by one percent today and then up this amount by one percent every 90 days from now on.

“It doesn’t seem like much, but in five years, you’ll be saving 20% of your income,” he says.

When You Can Buy More Choices

Financial independence is all about having more options, says Jillian Johnsrud, a writer, speaker, mentor and creator of Montana Money Adventures. She says to think of it as a gradual process.

“To me it’s a sliding scale and something we can grow into, not a line in the sand. And at each stage, you realize you had more choices than you had before,” says Johnsrud.

For instance, taking a week-long vacation instead of working 52 weeks out of the year is a form of financial freedom. And, when you have the ability to work part-time, you’ve gained a little more financial independence. Here’s another example: perhaps you can finally leave a job you hate, even if it means a pay cut.

“I think it’s important to celebrate each milestone we hit as we grow our financial health, and find ways to leverage it to help create a life that truly lines up with our values, passions, and purpose,” says Johnsrud.

What Does Financial Freedom Mean to You?

If you have a slightly different idea of what financial freedom means, more power to you. The beauty is that is you get to create your own definition of what it means to be financially free. You also have the power to design a roadmap and your own specific navigation system. Are you ready to start the journey toward financial independence?

How to Become Financially Independent

Achieving financial independence begins with changing your money habits. Start with a small change in your daily life such as making a point to save $1 every day or committing to only using a debit card for a week. Over time, these small habit changes can lead to significant outcomes by helping you establish a rhythm to your savings habits.  Another approach to establishing these habits is to lean on financial automation. For example, if you open a bank account with Chime, you can enable Automatic Savings which helps you save money every time you spend as well as automatically direct a percentage of every paycheck deposited into your savings.

Here Are a Few Good Money Habits to Pursue on Your Way to Financial Freedom

  • Pay Yourself First – make a point to pay into your savings accounts every time you get your paycheck. You can even use an app like Chime to automatically divert the money on your behalf. This small habit can help you rapidly build your savings balance over time.
  • Pay Your Debit Card – when you pay with a debit card, you can only spend the amount of money available in your account. This will challenge you to think more critically about every purchase you make.
  • Commit to a Goal – set a goal for yourself using SMART goals. This will ensure its: Specific, Measurable, Acheivable,  Relavant, and Time bound.

This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.

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Jackie Lam is an L.A.-based financial writer whose clients include Fortune 500 companies and FinTech startups. Her work has appeared in Forbes, Business Insider, and GOOD.

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