On Defining 'Financial Freedom'

"Everything can be taken from a man or a woman but one thing: the last of human freedoms to choose one's attitude in any given set of circumstances, to choose one's own way." ~ Viktor Frankl

I wrote a blog post, called How Do You Define Financial Freedom?, which was published today at the outstanding personal finance blog, Get Rich Slowly.  If you are new to The Financial Philosopher, please take a look around by clicking on some of the themes in the toolbar or by sampling some recent posts in the right margin of this page. 

If you are already a reader here at The Financial Philosopher, please visit my post, How Do You Define Financial Freedom? at Get Rich Slowly.  I'd love to hear some of your brilliant thoughts in the comments there!

Whether you are new here or not, or if you are an email subscriber, here are some TFP posts with thoughts similar to those found in the financial freedom post at Get Rich Slowly:

The Five-Minute Retirement Plan

Life Planning Part I: Are You a Tool? (Links to Parts II & III are there)

Dogma Deconstruction & Abstraction Subtraction

The Experience-Stretching Hypothesis

The Non-Financial Cost of Retirement

Man's (Career) Search for Meaning

I'll be back next week to extend upon last week's post, which introduced the theme of ego and how it gets in the way of financial (and life) success.

Comments

[Marc]

Kent,
I read your piece in the Get Rich Slowly newsletter they send out. It was one of the best pieces I have read on contentment in some time.

It reminds me of the graph in Chapter 1 of "Your Money or Your Life". The most contentment comes from food, selter, clothing and a warm place to stay with a roof over our heads. The more we possess after that, the less "units of contentment" they bring. At the top of the arc, which we must decide for ourselves where it is, is the point of balance, and anything bought after that tends to work against us.

Good, philosophical pieces about financial freedom written in layman's terms are hard to find, but I do believe your site is a good source for them. Though I am busy trying to finish up a degree in accounting in the next few months, I will take some time at some point and look your entire site over.

Best of luck to you.

Marc

[Kent @ The Financial Philosopher]

Thanks Marc!

I've not read "Your Money or Your Life" but many of my readers have generously compared my ideas with those found in that book. I should read it!

Here's a link to an older post here at TFP that you might find interesting:

http://financialphilosopher.typepad.com/thefinancialphilosopher/2008/08/the-diminishing-marginal-utility-of-wealth.html

Thanks for the comment and good luck with your accounting studies! I hope to hear from you again....

Kent

[GregLinster]

Hey Kent!

First off, congrats on the guest post at such a well known blog. In my humble opinion, you're one of the best writers and thinkers in the blogosphere!

Like many others, my definition of financial freedom has changed over the years. I do believe that financial freedom exists, albeit it can be tricky to define. My definition would be when passive income exceeds needs and desires. In an equation your freedom score would be written as:

Financial Freedom = Income/(Needs+Desires)

Most people focus on the numerator piece of the equation. I believe we should focus on the denominator because it can be changed with one simple decision; we can become more free starting today.

Cheers,
Greg

[Kent @ The Financial Philosopher]

Greg:

I like your formula and agree that people should focus on the portion of the denominator that is most within the control of the individual -- Desire.

Needs are fairly fixed, according to the society (monetary needs are higher in North America, for example, than in South America). Desire is controllable.

"If thou wilt make a man happy, add not unto his riches but take away from his desires." ~ Epicurus

[Concojones]

Greg: "My definition would be when passive income exceeds needs and desires."

Even though I'm looking for passive income myself, its very notion is beside the point. Kent at GRS: "life isn’t about the destination but about the journey. Financial goals are destinations; they're not life." As I've said before, this post is the most refreshing thing I've come across in a while. While it's nothing new for me, it's good to calibrate our thinking from time to time. I'm now off to read some of your other material, Kent!

[Concojones]

...update: brilliant, brilliant! I'm going to start following your blog, Kent. BTW, where does your interest in philosophy come from? Did you major in it in college?

[Kent @ The Financial Philosopher]

Concojones:

Thanks for the generous compliments! You are right in saying that my philosophies are "nothing new." Most of my ideas are not original; they were thought and written hundreds or even thousands of years ago.

As von Goethe said, "All truly wise thoughts have been thought already thousands of times; but to make them truly ours, we must think them over again honestly, till they take root in our personal experience."

As for my love of philosophy, I only had one philosophy class in college. I loved it! I took notes just for the fun of it! At the time, however, I was studying music and business and never thought philosophy would have any lasting impact or influence on my life.

It wasn't until my first child was born, 9 years ago, that I began writing some of my thoughts.

The Financial Philosopher blog was a blessing because it enabled me to organize my thoughts and grow with them.

I am now writing two E-books and one full-length book. The first E-book is a life planning model and will be free to readers. The second E-book as an annotated book of quotations. I've just begun shopping the full-length book to publishers and agents.

Thanks again for the comments and for following my blog!

Kent

[GregLinster]

Concojones:

You bring up an interesting point: Does freedom equate to a destination? Can one be free while still on a journey?

I eluded to my answers in my first comment. I'd be curious to hear yours.

You said, "Even though I'm looking for passive income myself, its very notion is beside the point." Why are you looking for something that won't set you free?

Cheers!
Greg

[Concojones]

Greg:

If you think about it, we're all free as a bird. If there's a cage, it's the self-imposed one of our desires, as you referred to above.

More expensive desires usually means more sacrifices (working a job you don't like) and an increasing desire for passive income to set you free from those chains - we tend to forget they're self-imposed.

The day you have that passive income and quit the job, you'll still have to do something meaningful with your time. Lying at the beach becomes boring after a while (I've actually tried it). Speaking for myself, chances are I'll be doing something that resembles a part-time job. I don’t know exactly what it will be, but I bet it’s something I could go do right now, and the earnings would cover my living expenses if they're not too high.

So why I am saving for passive income anyway? As a back-up and for when I'm too old to work. But I try to tell myself to live life now and not wait for the arrival of that passive income.

Just my 2p ;-)

[GregLinster]

Concojones,

I think we are essentially arguing the same thing from different perspectives. Freedom from work is not the goal, but rather, freedom to find a meaningful and fulfilling use of our time. My definition of financial freedom simply implies that one is entirely free to pursue these higher needs and jobs/activities/etc regardless of if they pay or not. I would argue that one can find meaningful activities that don't require payment in the form of money (volunteer work, philanthropy, etc). Lying around the beach all day would be quite boring eventually!

We can go back and worth on the best way to achieve or re-frame these freedoms in our minds, but I think control over our time is ultimately what you and I are looking for. As you mention, living in the present is important, but it must be tempered with preparing for the future.

Cheers!
Greg