Since this blog is exploring my journey to financial independence, it seems reasonable to explore exactly what financial independence means, both in general terms, and also more specifically to me.

At the most basic level, financial independence is having enough assets saved that they can sustain you for the remainder of your life. The assets can come in different flavors (stocks, bonds, real estate, cash, or really anything that has a significant value) and the ways in which those assets are tapped to pay for your independence are also varied (stock dividends, real estate rental income, actually selling things off).

As we consider this basic definition more carefully, we might start to consider what exactly “sustain” actually means? Does it mean barely able to afford the most basic of necessities? Or maybe it means being able to buy a private jet and an island to fly it to? Okay, perhaps a private jet is far beyond what most of us really need, but the answer to the question of where the FI finish line is actually located is pretty fuzzy.

Blogger J.D. Roth has a really great “Stages of Financial Freedom” article that explores this fuzz. The article describes six stages on the road to financial freedom, and stages 4 through 6 describe exactly what I’m describing.

4. Security: “Your investment income covers your basic needs.”
5. Independence: “Your investment income supports your current standard of living.”
6. Abundance: “You have enough - and then some.”

For me, while I imagine that hitting each of these is significant, it also must be an exercise in diminishing returns. Having enough to cover your basic needs means no matter what, you’ll never be thrown onto the street or go hungry. That seems very significant.

Being able to cover your current standard of living is certainly nicer, but ask anyone that is destitute if they’d trade food for concert tickets or a vacation, and you’ll quickly learn how much less important those things truly are.

When I discuss hitting FI, I’m typically talking about getting to Independence. That being said, I do have to remind myself that in many ways, Security is more significant. As for Abundance, I find that most of the things I bring me joy are either inexpensive or free.