Tuesday, 19 February 2008

What is Financial Freedom?

Dr. Stephen Covey suggests that if a person was financially independent, it doesn't mean that they are financially wealthy at all. Some wealthy people are financially very dependent upon their wealth; and if the wealth is spent, lost or devalued for some reason, they are wiped out.

Rather, a financially independent person is one who has so many skills and capacity; there are many options that they can take for employment or producing income. They are capable of making a livelihood for themselves and their loved ones in many different ways and circumstances.

So, even if I were to win a million dollars from the lottery today, I wouldn't be financially independent because I am very much relying on that money to be a millionaire. If that money was lost, I would no longer be a millionaire and there would be no way for me to make it back again.

For me to become financially independent, I would need to be able to produce a constant stream of income that can support my desired lifestyle. That's the only sustainable way of being a millionaire. And I believe this is what true financial independence means.