This post is from Kent Thune. Kent urges and guides readers to place meaning and purpose before money and planning at his blog, The Financial Philosopher.
Can freedom be bought? Are there any (financially) poor people who are free? Are there any (financially) wealthy people who aren’t free? If someone were to ask you, “What’s your definition of financial freedom?”, what would you say? Be honest with yourself: Would you reply with a concrete definition? Or would your answer be more abstract?
The conventional definition of financial freedom goes something like this:
Financial freedom comes when you’ve saved a nest egg large enough that the interest earned from your savings will replace 80% of your current income, adjusted for inflation, when you decide to retire. (Assuming your savings are your only source of retirement income.)
Because of its abstract nature, financial freedom is among the most abused ideas in the world of personal finance. In my early training as a financial planner, I was taught to use questions like these to provoke action. (Or, more accurately, to provoke anxiety.)
- Are you on track to reaching your retirement goals?
- Are you paying too much in taxes?
- Are you a slave to your debt?
- What will happen to your money after you die?
- Are you on course to achieve financial freedom? If not, would you like to know for sure?
The idea of financial freedom is no conspiracy to deceive the masses, but it sure has sold vast quantities of financial products and services! How many books, websites, blogs, magazine articles, media advertisements, and financial planners have used the term financial freedom as leverage to sell something?
But how can a person be free if their idea of freedom is defined by monetary means, by someone else — or not defined at all?
It’s important to be aware of abstraction, ideology, and dogma when you encounter it. If the term financial freedom isn’t made concrete (defined by and for a specific person), there’s a danger that true freedom may never be obtained regardless of financial wealth.
Would you agree that life isn’t about the destination, but about the journey? Financial goals are destinations; they’re not life. But isn’t the freedom that money apparently purchases worth the sacrifices we make to reach this freedom? Try answering this question by asking another question: Can freedom be bought? If not, then what does this say about the pursuit of financial freedom?
Meaning precedes money; purpose precedes planning. It’s contradictory to believe that a given life objective can be reached by financial means. The blind pursuit of financial freedom is often closer to slavery than it is to liberation. It’s making life a tool for money, whereas money should be made a tool for life.
I believe that financial freedom, if it exists, lies at the point at which the utility of money begins to diminish, the point at which the basic sources of physical well-being — food, shelter and clothing — have been met. At this point, financial freedom may be had by (and defined as) the capacity to eliminate the desire for more money. Or, expressed in one word, contentment.
Really, though, the only wrong definition of financial freedom is the one that isn’t yours. Don’t allow any financial planner, family member, friend, blogger, or anyone else to influence your definition of financial freedom!
With that in mind, what is your definition of financial freedom? Does it even exist? Can freedom even be bought? Are you free yet?
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