What is a financial independence, and why we should want to achieve it

I’ll start with a simple definition of a financial independence. It is a state where:

“Passive income will cover your living expenses and a reasonable level of liabilities.”

Income from assets = necessary expenses + reasonable rate liabilities

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Explanation of terms:

  • income – you know, salary, income from business, social benefits …
  • necessary expenses – rent or direct debit repayments, food, fuel, expenses for children …
  • liabilities – everything you buy for pleasure while you know that you do not earn any money, car, vacation, …
  • assets – everything that earns you money; apartment for lease, mutual funds, car business (e.g. taxi)

 

Why should we even try to be financially independent?

For me it is the unified one reason and that is FREEDOM. Freedom of choice no matter what it is about. As long as one is dependent on his income, he will always think about whether he chooses the right path and whether he will have sufficient finance for livelihood. At the moment when he is financially independent, on the road he is gaining experience, both positive and negative. All the time he does not need to solve, whether he has money for his livelihood or not.

What is a financial independence, and why we should want to achieve it

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