When I decided to get serious with this blog, I got back on Twitter, and tapped into the personal finance community. Boy, what a world. The conversations are equal parts entertaining and thought-provoking. The most popular topic is the quest for financial independence and financial freedom. Some people look at these two terms as one and the same, but to me, they are vastly different. I define financial independence as: the state in which an individual can cover all of his/her living expenses from investment income and does not need to work. This is a straight-forward definition that most people would agree. Financial freedom, however, is much more subjective.
I didn’t question the meaning of these words until Xav and I had mapped out a “freedom plan”, and started a countdown. With a plan in place, we began envisioning our ideal version of life. It quickly became apparent that if we stick with the original plan, many things on the bucket list I wanted to complete before having kids would not happen. I wanted to learn to code, to travel slowly for months at a time without kids in tote, etc. With that realisation, we began to think deeply about where we want to be on the financial freedom spectrum: between not having to work another day, and working at a soul-sucking job 50+ hours a week.
Freedom to Choose My Work
When I was saddled with $120k of student loans, I did not have freedom to choose. At least not REALLY. I chose to move to China to take advantage of the economic boom. But I had to choose a job that paid well. When that debt was eliminated, I gained more freedom to choose my work. The degree of freedom expanded much further when a paycheck needs to only pay for living expenses, over which I have full control, vs. paying off debt + living costs.
This freedom to choose also allowed me to entertain the question of “passion” for the first time in my life. Growing up in an immigrant family, my parents gave up decent-paying careers in Taiwan and moved to the US, making not much above minimum wage. The sacrifice was to offer my sister and I the “freedom” of American education. It was always engrained in us to choose professions that pay well. Job is a means to a paycheck end. Our “passion” should be pursued on evening and weekends.
Then I went to fancy schools where “pursue your passion” is all people talked about. I admired classmates going after their interests and dove into professions that traditionally did not pay much – journalism, NGOs, teaching, etc. I was impressed, but I didn’t feel free to make those choices. Instead, I “sold out” and made money. To look at my career now without much regard for the paycheck size is a fundamental shift, and surprisingly difficult. Just because I’m free to choose doesn’t meant it’s easy to do. Yet, having the freedom is first step.
Freedom to (Temporarily) Not Work
Once we were debt free, we boosted investments. I crunched numbers at least twice a month to see when I can finally quit my job. After every mind-numbing meeting, I would go back to my desk and google, “When Can I Quit My Job?” The convention wisdom is that I should start side-hustles and establish income before quitting. Or, I can quit when I am financially independent. Not many discussed a temporary break from work.
We decided to stockpile cash that would cover one year worth of expenses, then quit. The idea is to have cash-on-hand while our investment fluctuates with market conditions. We were glad to have this flexibility in place when the market dipped over the winter. On top of the discipline to build up a cash pile, this decision also required the courage to believe that we will secure jobs in the future.
Society at-large somehow has this belief that “resume gaps” are bad. This causes people making up “consultant” positions on their resume when in reality, they are traveling the world and enjoying life. Why is that necessary? I firmly believe a job hunt is a two-way street. If a future employer cannot appreciate the value of taking time to prioritise travel (or whatever personal endeavour I wish to pursue), then I’m not interested in devoting my time and skills toward this organisation.
Building the confidence to walk away was as important as stockpiling cash and investments. Financial freedom isn’t just about money; a confident mindset to be free counts just as much.
Freedom to Slow Travel
Like a good Tiger Child, I never took more than a few weeks of breaks between each major life event. I read all about people who takes 6 months, a year, or more to travel full-time. Then when I met them in hostels, I oozed envy. I wanted to travel beyond my 15 days of vacations days. I wanted to book flights in the middle of the week when it’s cheap. Most of all, I wanted to experience travel as a lifestyle, rather than an extended vacation.
When the universe conspired for us to leave our lives behind in Shanghai last summer, we had the financial freedom to seize this opportunity. We embarked upon full-time slow travel. With it, I felt the true sense of financial freedom. It’s incredibly exhilarating and freeing to never have plans more than a few weeks in advance. The ability to wake up each day then decide how the day will be spent was equally liberating. This grand freedom juxtaposed sharply against the predictable nature of corporate life.
I am glad to have discovered that I don’t need 25 times of my annual living expenses to enjoy this financial freedom.
Freedom to Drink My Coffee in Peace & Go to the Gym
After 8 months of globetrotting, our cash reserve is running low. We also craved a little bit of stability, so we are trading house-sitting for free rent this spring to figure out the next step. In contrast to slow travel, we are currently living a quiet life of sitting in front of the computer for hours on end, going to the gym, grocery shopping, eat, Netflix, sleep, repeat.
Yet, the freedom to wake up and drink my coffee in peace is better than scrambling for an outfit, commute, and desperately getting my hand on a coffee in a mad frenzy before an 8am conference call. I can step away and leisurely work out for an hour or two without worrying that it would “look bad”.
These micro frustrations in a traditional office environment can compound to feel suffocating. Identifying these elements should help aligning culture fit and work style in future places of employment.
Freedom Your Way
I wish I had learned earlier that financial freedom isn’t so black and white; it would’ve alleviated a lot of stress and frustration. My version is most likely not yours, and that’s the beauty of our diverse lives. Have a long-term financial freedom vision is helpful to serve as the North Star, but defining a short-term freedom goals is paramount to avoid burnout, keep some sanity, and enjoy the ride.
I would love to learn what your version of financial freedom looks like. Please share in the comments!
From the Blogosphere
- The 4% Rule Only Offers One Way to Cover Your Expenses | Four Pillar Freedom
- Reader Question: Should I Keep my Stressful High-Income Job to Reach F.I. as Fast as Possible? | Four Pillar Freedom
- Our Changing Definition of Early Retirement and the Power of the Freedom to Fail | Our Next Life
- Why “Financial Freedom” Means Something Different to Me | Our Next Life