What does it mean to be Financially Free?

by Tom Tousignant

in Blog, Financial Safety, Mortgages

I’ve been called a ‘Financial Freedom Fighter’ as  a result of my US Air Force Fighter Pilot experience and my current focus helping people with their finances, especially with home loans.

I recently read this in the financial blog, The Big Picture:

Financial freedom is such an overused and abused term that its meaning is bordering on abstract.  As of this posting, a Google Search for “financial freedom” produces more than 33 million results.  What is financial freedom anyway?  Who decides the meaning? How can one be free if their idea of freedom is defined by someone else, or not defined at all?  Does financial freedom even exist?

For me, it was defined best by Robert Kiyosaki in Rich Dad, Poor Dad, and taught in his game, Cashflow 101.

Financial Freedom is when your assets (think stuff you own) earn you so much money that you don’t need your day job.  You are then free to go to work, or to stop working, or to work less.  The key to achieving this is to put your assets where they are earning you money.

Is your House helping you achieve Financial Freedom?

If assets are supposed to generate cash flow, then equity in your house fails this test. It just lays around.  This is why I always counsel people to make an informed decision about the repayment of their home loan, so they are just blindly following the banks’ advice (which only helps the banks, not the home owner).

Debt Free or Financially Free?

I don’t mind if you want to pay off your mortgage – I just want you to know why you are paying off your mortgage, and what are you giving up to do so.  For many people, they have a choice between Financial Freedom and Debt Free. If you are Financially Free, you can pay your mortgage without going to work.  If you are only debt free, you still need to work in order to eat and pay property taxes, as a minimum.

Which would you rather have?

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