What is financial freedom?

Recently, I have quite a bit of discussions with people on this topic. When I asked, “what does financial freedom mean to you?” Surprisingly, the answers are not the same from different people. Generally, there are a few definitions to “financial freedom”.

1. Some people define financial freedom as not having to worry about finances anymore. So when I asked more, they will answer that financial freedom means they are having enough income to cover their basic expenses. Say one needs RM 3,000 per month to pay for food, utility bills, rental, kids school education, he will achieve financial freedom when he gets the RM 3,000 income every month despite not working.
2. Some people define financial freedom as having the leisure to buy what they want. For example, one might want to have a luxury car, a big bungalow to be considered as financial freedom.
3. Some people define financial freedom as being able to finish paying off all the mortgages and loans such as car loans, house loan, credit card loans, etc. When there is no more loan, one is financially free as he / she does not need to worry about financial commitments anymore.

The usual definition of financial freedom is as follow: –

Monthly expenses = Monthly passive income

When one can achieve the above, he can be considered as achieving financial freedom. Some books will mention that this is considered as financial independence. Financial freedom will then be the next level above financial independence, means having enough money to buy what one needs and wants. Regardless the definition of financial freedom, it is important for one to recognise the importance of having sufficient passive incomes. This is the key to financial freedom.

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