Peace of mind is an awesome feeling many individuals desire, but only a few truly get to experience it in their lifetime. Ask any life coach for advice: A lot of time, you’re likely to hear to take care of your health, have a safety net, or set your heirs up. The opinions may vary based on ideologies and personal experiences, but life goals in general always come back to two main factors: financial freedom and financial independence.
Often, these two terms are used interchangeably, and for the most part, they have more similarities than differences. Regardless, knowing the little differences can help shape life choices. Let’s break it all down step by step.
What is financial independence?
The best thing about having money is the financial position to make more money. But is there anything like enough money? The answer to this question contextualizes the definition of financial independence. Wealthy individuals gravitate more toward the financially independent bracket because of their amount of money, automobiles, and good standing with insurance companies.
Being financially independent is making enough assets so you don’t become a victim of the necessity to make a quick buck for survival. If you’re in Canada seeking this kind of life, Googling “investment apps Canada” can help you find tools that set you on the right track to improve passive income generation. But financial independence doesn’t revolve around only enough savings and physical assets but also your time.
Financial independence usually takes time with continuous adjustments every step of the way. It also requires enough discipline to achieve financial mileposts. Many of the United States’ financially independent brands like Amazon are best known for a culture of frugality to survive harsh market conditions. Some financially independent characteristics can include no or few income limits, portfolio diversification, good credit score, stock market resilience, and more.
What is financial freedom?
Financial freedom has been defined in many ways according to varying information purposes. But exactly what is financial freedom? Let’s start from the top. Life is full of uncertainties, from unexpected bills for your small business to poor health issues. Any of these factors and several others in between can drain your bank and personal investment account. And what’s worse is that you never know when any of these issues might hit.
That’s where financial freedom comes in. Financial freedom is a basic mindset of living life. An individual can be financially free when life’s uncertainties, including mortgage, don’t affect life’s betterment. Financially free characteristics include high-risk tolerance, low temptation to make an unexpected expense, and more.
Ways they both differ
Some of the specific differences between financial independence and financial freedom include:
1. Freedom is a mindset; independence is a skill set
Freedom fuels independence. It takes a financially free mind to seek innovative ways, like cryptocurrency, to push financial independence further. Thinking you are independent and have it all can be a recipe for financial disaster.
2. Independence is an end state; freedom is forever
Independence can be a mark or target you cross. Everything else can be extra grace. A typical example is how founders leave billion-dollar companies in the trust of business partners to pursue charity and other socially noble causes. Bill Gates is more visible in the global health space leveraging his resources for the fight against COVID-19 and malaria, but he still wields the potential of selling investments and making scalable investment choices.
3. Independence is in the now; freedom is for the future
The founding fathers of many countries fought and gained independence in their time. Hundreds of years down the lane, people still enjoy that freedom. Individuals sell stocks, and one of the perks of using the best apps today is how decisions can translate into instant results. All these instant gains contribute to a more financially free future.