What Does Financial Freedom Mean To You?

by Darwin on February 22, 2010

I hear the phrase “Financial Freedom” batted around like it’s goin’ outta style.  Scammy multi-level marketing outfits tout financial freedom, mutual fund and money management companies refer to it, magazine covers…it’s everywhere.  I guess Financial Freedom means a lot of things depending on who it is you’re asking.  The problem with advertising that phrase is that most of the people being advertised TO will have actually achieve Financial Freedom in a practical sense.

  • Did a sucker that signed up for an MLM and actually ended up paying more money than they made over time achieve financial freedom?
  • Did a mutual fund that lost money over the past decade (while taking 1% of assets per year) really deliver you financial freedom?
  • Does XYZ’s list of “The Best Dividend Stocks” deliver you financial freedom when they were all Financials that cut their dividends in 2008 and 2009 and their shares lost 80-95%?

What is Financial Freedom To Me?

F&*! You Money. Yeah, that’s right.  That’s what it is to me.  It’s having the kind of money that if an important customer or a corporate higher up calls you up and starts tearing you a new one, you can say, “F@#$ You…Bye” and walk out the door without thinking twice.  In effect, you have so much money, that you could care less.  It means you have no qualms about paying for your kids’ college tuition and board at a reasonable college of their choice.  It means that when taxes rise substantially (which they must as a mathematical certainty) and when Social Security delivers little meaningful income (which it is virtually assured that payments will go down while collection age goes up) and when your pension’s in trouble because your company allowed unfunded obligations to continue unabated and declared bankruptcy (which many do today – and you get a “portion” of your prior obligated commitment)…when these things happen, you are completely insulated from the madness – because you’re “financially free”.
We’re nowhere near that point.  Realistically, I don’t know that we ever will be.  Heck, we have three young kids at home, we’re on a single income, and I don’t work on Wall Street.  So, at the moment, we’re getting by.  But that doesn’t mean that Financial Freedom isn’t something people should strive for.  We should all have goals, right?

What Are We Doing to Pursue Financial Freedom?

We attempt to balance pursuit of these lofty goals with living in the moment and enjoying life with our young children simultaneously – reasonable consumption with aggressive savings/investment targets.  By living within our means and employing sound money habits, we’re providing our family a decent chance of a comfortable retirement, fully funded eduction for our offspring, and possibly, generational wealth.

Some basic tenants of this plan include:

  • ALWAYS spending less than we bring in.  This entails NEVER paying a single cycle of credit card interest, ignoring “no payments for 12 months” come-ons that DO actually have to be payed for someday, and other instant gratifiers with negative long-term consequences.
  • Appropriately aggressive investing strategies. People are gun-shy from the recent financial crisis and market decline.  Stocks declined more quickly an unabated than anyone our generation has ever witnessed.  So, this was great for us on the way back up because we didn’t panic and sell.  In fact, we bought more, while continuing to make routine periodic retirement investments.  Over long periods of time, longer even, than the 10 year lost decade we just lived, stocks tend to outperform all other conventional assets.  Why?  You’re being compensated from the risk I just highlighted.  Investing in savings accounts is about as safe as you get, and you can have a fat 0.5% a year on that right now.  Leaving money in a money market account in a 401K for 30 years is a great way to lose money to inflation to the tune of hundreds of thousands of dollars come retirement.  While diversification and risk management is prudent, being overly conservative in your long term investments is downright dangerous.
  • Exploit Opportunities as they arise. Aside from seeking to maximize long term returns for college and retirement funds with long time horizons, I employ various tactical investment strategies in the small portion of our funds in a traditional trading account to exploit market herding and inefficient market developments (see how I make double digit returns in any market by seeking to short ETFs that lose value over time).
  • Save for a rainy day. Not only do we set money aside for college funding and retirement, but we also carry an emergency fund.  while this emergency fund doesn’t earn blockbuster stock market returns and it could have been a nice vacation and flat screen TV instead, it will cushion us in the event of some catastrophe we can’t even contemplate.  Our is about 3 months’ salary, but depending how we look at it, we could free up more in a pinch.  Having no cushion at all can force life-changing decisions though, like having to sell major investments at a loss, having to sell a house, having to do things that you wouldn’t have done if you only had a cash buffer.
  • Back to Basics. By starting with some basic financial keys to success, these are some basic tenants to build the foundation for a successful financial future.  But it never stops.  It’s an evolving process.

What Does Financial Freedom Mean to You?

You're Not Following Darwin's RSS? Check out Why You Have to Subscribe to Darwin's Finance!

If you enjoyed this post, you can get free updates through RSS Feed or via Email whenever a new post is published. Rest assured that you can unsubscribe at any time via the automated system and your information will not be sold, archived or utilized for any other "nefarious" purposes.

{ 1 trackback }

The 219th Festival of Frugality: The Ration Book Edition | Miss Thrifty
March 2, 2010 at 8:14 am


1 ctreit February 22, 2010 at 12:52 pm

I am with you. If you can say, “F&*! You Money” you have attained financial freedom. Alas, I wonder if you don’t become hostage to the money you have when you can actually say this. How “free” are you then?

2 FinEngr February 22, 2010 at 2:01 pm

Darwin – Right on! You’ve taken a misrepresented concept and marketed it into one, easy to remember, vulgar phrase – love it.

Financial wealth will not make you free, being able to walk a straight line towards your goals and deflect all of life’s external hinderances will.

Like Financial Samurai talks about (with regards to net worth), its having that liquid cash. There’s lots of “potential” out there, but that’s all it is – potential. How easily could you walk away if you had to?

I’m interested in your hedging technique. Is it in the traditional sense or something different?

Financial Samurai Reply:


Thanks for the shout out and sharing your thoughts today on Government Sexism!

F U money is something that gets mentioned A LOT here in SF… b/c frankly, it’s all around. But, it’s dishonorable to have that attitude imo. My way is to be filthy wealthy, but have NOBODY know you are wealthy.

FinEngr Reply:

@Financial Samurai,

But isn’t that what Darwin is arguing?

FinEngr Reply:


Sorry, here’s the line

“In effect, you have so much money, that you could care less”

3 Ken February 22, 2010 at 3:20 pm

Financial freedom means having the freedom to earn interest on your money instead of paying interest to someone else. Not there yet but working on it.

4 Budgeting in the Fun Stuff February 23, 2010 at 12:15 pm

Financial freedom to my husband and me is when we can do what we want with our day without worrying if we can afford it. Luckily we’re cheap, so this is attainable.

He wants to watch tv, board game, video game, participate in Curling (the ice sport), continue being a sports official, vacation, and play Magic: The Gathering till the wee hours of the morning.

I want to hang out with friends even more, have more potlucks, have more movie nights, take a few vacations a year instead of just one or two, volunteer even longer with dogs, deliver food for Meals on Wheels, and get involved in a couple of hiking groups.

With any luck, we’ll hit our retirement target as planned at age 52 and be able to do all of the above. In the meantime, we’ll continue to fit in as much as possible of the above and try to enjoy our jobs as much as possible.

5 LeanLifeCoach February 23, 2010 at 8:39 pm

Honestly I think financial freedom means having the opportunity to make the choices you really desire. It may not be wealth or rich and it is very personal and relative to your expenses and lifestyle.

What you are describing I would call financial ecstasy!!!

Nice topic Darwin!

6 Bytta@151DaysOff February 23, 2010 at 10:52 pm

Being able to live in a sailboat or RV and travel around the world. It’s surprisingly MUCH cheaper than living in a western country… you know, the suburban lifestyle.
I’m gonna do it and not look back.

The key to do it is to spend less than half of your income now, have enough cash to earn 4% return which covers your living cost and don’t have kids 🙂 (at least delay as long as you can).

7 Christina February 24, 2010 at 12:08 am

For me it simply means I can buy the things I want, do the things I love when I want it without the trouble of finding the resources to actually afford it (just need to prioritize and earn extra if I need to). It simply means being content with what I can do with what I earn plus the savings regardless of amount so long that I could sleep peacefully at night and do not deprive my self with whatever that I can afford.

8 Funny about Money February 25, 2010 at 2:20 pm

What does FF mean to me? Pretty much like you said!

I’m doing a series on the subject, the gist of which is that FF means freedom to get off the day-job treadmill, and that it entails getting out from under debt (all debt), living below your means, accruing enough to provide a basic income that will keep food on the table and the roof over your head, and developing income streams that let you do what you want to do, not what someone else tells you to do.

9 Kevin Khachatryan February 25, 2010 at 7:46 pm

I like these two points for being financially free:

Spend less than you earn. This is common sense, but the main problem we have in America, where saving rates are the lowest worldwide. People spend money they don’t have and then have to catch up on their debts.

Save for a rainy day. Always have 6-8 months income saved. This gives you so much power. You can quit your job and find another one. If something happens, you always have an egg nest.

10 Monique March 1, 2010 at 11:58 pm

What a great post!

Financial Freedom is being able to do what I want, when I want, where I want without worrying about any financial consequence.

To achieve FINANCAL FREEDOM I took the advice of those with more reason and started early. At 26 I started agressively paying off debt and plan to build an emergency fund next followed by maximizing my retirement.

11 Wizard Prang March 11, 2010 at 3:24 pm

“In effect, you have so much money, that you could care less”

You mean you COULDN’T care less.

Comments on this entry are closed.