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Do you know the difference between financial security, financial freedom and financial independence? Interestingly enough, not many people do! And if I were to ask a number of individuals from mainstream society, which of the three would they want for themselves most would choose financial security, as it is what they understand most. This is not necessarily a bad thing, but neither is it a great thing because who or what exactly is responsible for providing that (financial) security?
Just like the individual words themselves: Security, Freedom and Independence; financial security, freedom and independence, connotates three different things. And depending on the context in which they are stated they will again have a different meaning. So within the context of becoming financially savvy and financial education, this is how I define the three.
Financial Security is knowing you have enough to live on for life or having a good job/pension/income that affords you a good standard of living. Generally, when my peers talk about financial security it is relating to having a permanent and well paying J.O.B, albeit if one enjoys it or not. But what happens if one loses that job? Many are now seeing the true reality of financial security, specifically via a J.O.B!
Financial Freedom is similar to financial security in that it can be transitional. I believe it to be the stage from financial security to financial independence. Some believe that just because they are debt free they are, as a result, financially free, but of course this is not necessarily true. Furthermore, one can become financially free because of a lottery win or having received a big bonus from work. But what happens when the money runs out due to whatever reasons?
We have all heard the stories of lottery winners losing it all in a number of years! Why, because they thought the money would last forever and thus, got too comfortable with 'financial freedom' rather than working towards financial independence.
Financial Independence, on the other hand, is the ultimate and is about being independent of any and all external factors by making your money work for you rather than you work for money. If the economy is up, down, moving left or right, you are able to sustain yourself. You have multiple steams of passive incomes and you know that if all goes wrong tomorrow you can create your wealth again. Essentially it is a state of mind rather than a state of being!
To read the rest of the article and watch my Financial Independence video click here
To Your Financial Success & Becoming Financially Savvy!
Best,
Lavinia Osbourne
Butterfly Wealth Creation |
