Updated on 04.05.11

Personal Finance and the Idea of Freedom

Trent Hamm

“Financial freedom” is a concept that’s constantly bandied about among personal finance writers and presenters. I think it’s mostly used because it sounds good: freedom implies some sort of escape from oppression, and applying that sentiment to personal finance creates a picture of a future where you’re not beholden to creditors or lenders or your boss.

What does it really mean, though? Every time I consider that statement, I find myself puzzling over a series of questions. While these questions don’t necessarily help me to explain what exactly “financial freedom” means, the questions often do leave me with a better sense of my own future and my own philosophy for financial success.

So, let’s dig through those questions.

What am I seeking freedom from? I mentioned a few of the trite answers above – creditors, lenders, bosses. These are the immediate things that come to mind when we think about what financial situations we want to escape from.

Yet, the more I think about it, I recognize that the source that I’m really seeking freedom from is my own tendency toward poor financial choices.

Let’s roll back the clock six years. If I had the opportunity to wave a magic wand and eliminate all of my debts, I’d be thrilled. Honestly, though, I would likely have been right back in debt before too long.

When it comes to finances, you are your own oppressor. We’re often sitting in situations where we suffer from our own mistakes of the past. If we work for “freedom” from a debt, if we’re not free from our own bad behaviors, it’s just a matter of time before we’re back in debt.

What does freedom even mean? When I hear the word “freedom,” what does that really mean?

Freedom, according to dictionary.com, means “exemption from external control, interference, regulation, etc.” Of course, there are several definitions; another is “the power to determine action without restraint. ”

In general, freedom seems to mean the ability to make choices without restraint from others.

The thing is, we’re really only as free as we allow ourselves to be.

Take my own life. My only outstanding debt is my mortgage. I could be “free” of that debt by walking away from it, but my credit history would be devastated.

I have three children that are ongoing expenses. I could be “free” of that by walking away, but again, I would be a complete scumbag for doing that.

What about simply having a pile of money? Even then, I wouldn’t be “free” to help every charity that I’d love to help.

Simply put, a responsible adult never has total freedom. We are always restricted by some aspect of our life, whether it be debt, personal responsibility, or something else.

What we’re striving for when we reduce debt isn’t freedom, but better options to choose from. Instead of being strongly bent towards dumping my money towards debt, debt freedom means that I can choose to save that money for our country house or give it to a charity. Both of these options are more in line with what I want from life right now.

Where do I want to be, then? The next logical step is to simply look at my life and ask myself what I want from life right now. Freedom means the ability to make choices that move me towards those things that I want instead of using my resources to cover up other mistakes or to move in other directions.

Simply put, it’s all about goals. What do I really want out of my life? Where do I want to be in the near future? These are goals, and simply spending the time to identify one’s goals is a big step towards personal freedom.

Why? A goal gives you some guidance as to where to go, rather than acting aimlessly. It guides you towards making choices that work well together and push you to somewhere you want to be rather than working in opposition to each other.

Some people view goals – and particularly the plans that lead to achieving them – as a restriction on personal freedom. I view goals as the ultimate statement of freedom. I have enough control over the choices in my own life to move toward something bigger rather than just holding onto what I have and hoping for the best.

Freedom is a powerful word, but it means something different to everyone.

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  1. Steve says:

    Simply put, every post you write has the phrase “simply put” in it. Often either in the introduction or conclusion.

  2. You’re completely right… financial freedom isn’t actually about being free at all. Being free is not something most people want… what we want is the ability to decide what specific financial responsibilities to be “trapped by” versus having someone else decide for us. That’s true financial freedom.

  3. Danielle @ HWW says:

    I don’t think financial freedom is that complex of an idea. It means something different to everyone I’m sure, but freedom from: anxiety, financial hardship, paycheck to paycheck lifestyle, and debt are likely top of the list on many people’s idea of financial freedom. I agree with Her Every Cent Counts in that we want to e free to decide what to be “trapped by” or “saddled” by.

  4. Financial freedom….the power to decide

    A lot of folks think that if they had a lot of money – for instance, a big inheritance or a win in the mega bucks lottery – then they would be free of cares and worries.

    The truth is quite the opposite. Having lots of money can complicate your life beyond measure, unless you are prepared for it. Having lots of money does not equal freedom from financial worries. Your financial worries just become different than they were.

    Having lots of money does however give you the opportunity to decide – and the money can be a positive force in your life if used as a tool to reach your goals.

  5. Kathleen says:

    For some of us, financial freedom IS as simple as being debt-free and having enough money that future earnings are no longer necessary. It’s certainly not a desire to be free from any tendency towards poor financial choices. I made good choices – the choice to persue a valuable (albeit expensive) degree in a lucrative field, and to purchase a home that’s affordable now but big enough to grow our family in. Defining financial freedom as eliminating that debt isn’t really a “trite” definition. It’s just straight-forward.

  6. Tanya says:

    “Why? A goal gives you some guidance as to where to go, rather than acting aimlessly. It guides you towards making choices that work well together and push you to somewhere you want to be rather than working in opposition to each other.”

    That is an excellent description. It’s so easy to fall into acting aimlessly and get nowhere. Goals steer us toward what we want most. Thanks for an excellent post!

  7. Pat S. says:

    I had a realization today. The hard work and deferred gratification is working.

    I’m active duty military. For years, I was living paycheck to paycheck. As I was going through my emails this morning, I realized that because of the potential government shutdown on Friday, it is altogether possible that I wont get paid until Congress gets its act together and passes either a continuing resolution or a budget.

    This put my heart to beating very quickly, as for the longest time, I would have been unable to pay my bills had I not received a check (living paycheck to paycheck), but today I realized that because I have made some significant changes the government shutdown could go on for several months without my wife and I missing a bill.

    That was an amazing feeling. That’s why I’m continuing to pursue financial freedom. Because even in jobs that you think the American people value highly enough to maintain paying your salary, there’s always the what if.

    I worry more for those military members who are still living paycheck to paycheck, and hope that this shutdown doesn’t happen. If it does, it will only hurt the people we depend on most.

  8. Justin says:

    Awesome article–love the tie-in to freedom. A close friend of mine wrote this blog post about the freedom she felt in paying off her house–despite what the experts said. She describes it as a feeling of freedom much more valuable than whatever the experts are saying. Here’s the post: http://wealthhabit.com/blog/free-at-last.

    I also really enjoyed your thoughts about being goal-minded. I am a student of behavioral economics, not in a university setting, but through my own endeavors. I’m a part of wealthhabit.com, where we’ve found that success with personal finance is much more about psychology than accounting. Dollars and cents don’t mean anything to people, unless they are tied to what they care about. We’re producing an experience that makes success with money management less about money and more about what you really care about and how to fund that. This blog has some great thinking. Thank you-

  9. moom says:

    I think you’re making this too complicated. Financial freedom simply means having enough wealth so that you don’t have to work if you don’t want to.

  10. janeowens says:

    @Pat- that’s awesome! Good for you.

  11. Ash says:

    I enjoyed your article. Financial freedom for me would be to have no more mortage payment(about30% of my take home pay). Now that would be fabulous!

  12. Tracy says:

    For me financial freedom is about peace of mind. I’m just working toward the point where I no longer have to worry that some financial calamity is going to knock me back to square one. If it happens, I know I’ll be fine, but I’ve been there twice and I don’t really want to go back for round three, so I worry about it. When I have enough money to quit worrying, I’ll consider that financial freedom.

  13. Simester says:

    I think you’re right to think about ‘freedom’ in a different way, and you could continue this idea and create different ‘levels’ or ‘types’ of freedom.

    At the extreme end is ‘complete financial freedom’, where your investments or savings generate enough income for you to not have a job, but also to have luxuries in your life (think lottery winner here).

    Then there’s ‘standard financial freedom’, where your investments generate enough income to escape from a job, but you’re only covering basic living costs, and perhaps need to exercise frugality.

    Then I suppose there are the ‘lower levels’ such as freedom from mortgage debt, and freedom from credit card or loan debt (I think this is a very powerful, motivational and emotive kind of freedom).

    One type of freedom I’m pursuing (and I suppose you could call it ‘nest-egg freedom’ or ‘retirement investment freedom’) is trying to pay as much into my pension account as possible whilst I’m still relatively young, have a relatively large income and low outgoings (I have a great job, single, no kids). This means that within about 18 months, I will have enough invested to ensure a good retirement without having to worry about further payments (I will, in reality, still have to top this up from time to time, depending on economic conditions and investment performance).

    By having ‘nest-egg freedom’, if I’m ever made redundant, or decide to get married and have kids, I won’t see my future wealth goals slipping away from me. My nest-egg is already there, working in the background, and no matter what changes happen in my circumstances, I have the ‘freedom’ from worry, knowing that I will have wealth in retirement.

  14. leslie says:

    For me, this is over analyzing the concept of financial freedom. I would argue that for most people, financial freedom is all about having choices and options. If you are in debt up to your eyeballs, you really have limited what you can and cannot do for your job. If you have no savings at all, you really limit your choices when faced with an abusive boss or a job that doesn’t fit you well for whatever reason.

  15. I think you’re right, Trent, that financial freedom could be freedom from external stuff (like the examples you gave–creditors, bosses). But it is probably most often freedom from internal stuff (cognitive and emotional barriers that interfere with our persistence and our self-control as we work toward our financial goals). Thanks for the interesting post.

  16. Availle says:

    I’m afraid Trent, but it seems to me that yet again you don’t know what you’re talking about.

    YOU have no financial freedom. A few years ago your reasoning went “If I buy this, I can’t pay my bills”, whereas now it goes “If I buy this, it won’t be frugal”. The frugality thing is determing your whole life, and it’s not a restraint?

    I am rather frugal too, but it happens on an item-to-item basis. Let me explain that: Eating out is a treat, I don’t see shopping as an interesting pastime, and my latest hobby needed an investment of 20 $ on top of the computer I already had.

    On the other hand, when I moved to that town where I could not do my martial arts, I had to commute. The options for a one way trip door-to-door were: two hours by public transport versus one hour by car. As I am training three evenings a week I bought a car within a few days. It was certainly not frugal, but there was no thinking involved – I needed (wanted?) a car, and I bought it. Cash, btw.

    Seems to me that I have more financial freedom than you do…

  17. Chris says:


    I’m confused about your response. I understand your point, but I’m not sure how it really relates to the original post.

    A couple of points which I think you may have missed:

    The post says that “a responsible adult never has total freedom”. It’s written in bold…

    It also says that “Freedom is a powerful word, but it means something different to everyone.”

    Is it really a surprise that you and Trent have different views on what financial freedom means for each of you?

    I’m not sure I agree with your point here, but for a moment lets assume that Trent views the value of being frugal as one of his most important. If that’s the case, then of course frugality would determine his whole life. This wouldn’t be a surprise though, because Trent would have chosen it. I expect that in reality, frugality isn’t the thing that Trent values. I won’t speculate as to exactly what his values are, but I would imagine that Trent chooses frugality as a way of serving his real values.

    From your comment, it’s apparent that you highly value doing martial arts. When you moved, you didn’t have to commute. You could have just stopped doing martial arts. Yet you chose to continue. You chose to give your pursuit of martial arts a high value. You chose to allow it to control your time and finances. It sounds like you’re letting something determine your life. I’d just call it making a choice, but perhaps by your definition (as suggested by your comment) it be sacrificing freedom…

    Another line (in bold) from the post: “What we’re striving for when we reduce debt isn’t freedom, but better options to choose from.”

    Spot on.

    Of course we don’t all choose the same things. We’re all different, and we all make different choices. If we set goals (whether we think hard about them or not) we decide on a direction to walk in. We decide how we’re going to make our decisions, and then we make our own choices along the way. Our destinations won’t be the same though. Our destinations are shaped by our values and our goals. On the journey we’re as free as we allow ourselves to be.

  18. deRuiter says:

    #5 Ash, Financial freedom is within your grasp! Get a part time job and put every single dollar you earn at this second job onto the principal of your mortgage. If you are at the beginning of middle of your mortgage, this will save you many thousands of dollars in interest, and shorten the term of your mortgage by years. Your goal is so clear, and it is achievable! Want to whittle down the principla even faster? Have a garage sale and put the money on the principal. Don’t give your spouse (and vice versa) presents for holidays, put the money on the rincipal. Whittle that balance down, start now, and you will achieve your version of financial freedom sooner than you think. Every single extra dollar you put on principal shortens the term of your mortgage and lessens the amount of interest you pay. I paid off my 20 year mortgage in 11 1/2 years this way and what a joy it was to NOT pay a mortgage for those last 8 1/2 years, and that continues even today, NO MORTGAGE. We hear constantly how many people with mortgages in America are under water / owe more than house is worth. We NEVER hear that 30% of the homes in America are owned free and clear / no mortgage. That’s because frugal people, many of whom prepaid their mortgages, are not interesting to the press, it’s not a good story that 30% of American home owners have no mortgage. Ash, you can do this! Prepay on that mortgage and join us mortgage free!

  19. MikeTheRed says:

    For me, Financial Freedom is a series of discrete milestones, each one leading you towards the ultimate goal of true freedom from the paycheck. But everyone of those goals, including the definition of “freedom from the paycheck” is different on a person-by-person basis.

    My list of discrete freedom milestones:
    -No Student Loan Debt (managed to avoid this one)
    -No Consumer Credit Card Debt (cleared the last of that 2 years ago)
    -Six Month Emergency Fund (achieved 6 months ago)
    -12 Month Emergency Fund (achieved last month!)
    -No Car Payments (Done by the end of this year)
    -No More Rent (Plan is to buy a home in 1-2 years)
    -No More Mortgage (15-20 years past the previous goal)
    -Large Retirement Savings (Ongoing goal)
    -The freedom to travel and see the world (Ongoing Goal)
    -1 Year Net Salary Saved (Probably another year for this).

    Each of these goals is individual and manageable as a separate thing. Some of these goals I’ve already reached. Some are near-term. Some are far far away. And still some others are going to be ongoing goals for the rest of my life.

    Each goal was chosen specifically after much discussion with my wife. We wanted first and foremost to be debt-free. Then we wanted to have a cushion in case we lost our jobs for 6 months, then a year. In terms of income, the next goal is 1 year of Net Salary so either of us can up and quit a job if we need to.

    Each goal, as it’s reached, increases our freedom and provides us with more choices.

  20. Emily says:

    I haven’t been able to physically do the majority of my job duties due to a medical issue. Hubby and I are a few months ahead on all our debt so we didn’t pay anything to our student loan snowball and instead diverted the funds to an emergency medical fund in anticipation of medical bills.

    Holy smokes, if we had no debt, that is a lot of money that would free up every month. It was fun to day dream about what we are gonna do when we are free of debt.

  21. Kari says:

    #9 Mike – that is an awesome list! Especially love that this list is a thought out plan with your wife for your life together! I think I might borrow your list idea & modify to suit my needs. I sometimes forget why I’m doing all the frugal things I do. This would be a powerful reminder =)

  22. GayleRN says:

    Financial Freedom isn’t about money, it is about being able to control how I spend my time.

  23. Kevin says:


    “-Six Month Emergency Fund (achieved 6 months ago)
    -12 Month Emergency Fund (achieved last month!)”

    So in 5 months, you extended your emergency fund from 6 months to 12 months?

    Put another way, in 5 months, you saved up 6 months worth of expenses? So you lived on liberally no money at all and banked every penny, plus somehow saved up another month’s worth of bills?

    How, exactly?

  24. Kevin says:

    EDIT: “liberally” should be “literally.” This blog could really use an “Edit” function.

  25. getagrip says:

    @#4 You are making the choice to work because of how you have defined financial freedom for yourself. You don’t have to work, no one is overseeing you with a whip and beating you when you don’t work. You can stop anytime. Now, there may be consequences of that choice that may affect what you want or how you want to live. You’ve just made it a goal that to you financial freedom means maitaining your particular idea of a lifestyle without having a “job” to fund that goal. You are proving Trent’s point that we self impose things and as adults we accept those responsibilities. But as adults we also need to remember that we can change those things and alter what it is that we choose to have, to want, and ultimately acheive. I have a friend who has no possesions other than his clothes. He found it worked for him to live in a motel by the week rather than rent an apartment. I couldn’t live that way, but he loved the “freedom” it represented in that he could pack up and move at a moments notice, despite the fact he has the cash on hand to purchase a house outright. It’s all about what you want and the choices you make.

  26. valleycat1 says:

    #12 Kevin – An emergency fund needs to cover x months of expenses, NOT x months of income. So, yes, it is possible to save 6 mos’ expenses to an emergency fund if your expenses don’t equal your income. Some people take an extra job to do so, or couples put the income of one of the couple’s jobs solely toward savings.

  27. MattJ says:

    #12 & 13 Kevin:

    It seems the unspoken assumption in your question is that a 6 month emergency fund must equal 6 month’s worth of salary. That assumption is only correct if you need every bit of your salary to pay your bills.

  28. Allie says:

    Kevin, why is that so weird or impossible? I’m not Mike, but I can definitely see how that’s very very possible given the right cicrumstances.

    Here’s a scenario:
    Family of two, brings in about $4200 monthly, pre-tax. Comfortable enough to cover expenses and leisure, but by no means wealthy. After taxes, say take-home of $3000. Say a monthly budgeted amount of $1600, for bills but also for things that could easily but cut in an emergency, like gift fund, vacation savings, a “petty cash” column, and a bit more allocated to grocery fund than strictly necessary – all things that an emergency fund isn’t intended to cover anyway, as it’s intended only to cover bills and necessities, not unnecessaries like vacation savings. Presume that by cutting out unnecessaries, monthly expenses could be cut to, say, $1200.

    So, the target for a month of emergency fund in that scenario is $1200 – $1200 saved on top of the usual bills+savings outlay of $1600.

    Above, we assumed take-home pay of $3000. With a monthly bills+savings outlay of $1600, it’s still very possible to put $1200 into emergency fund savings, no problem at all.

    But part of your concern was how six months’ emergency savings could be done in five months? Well, six months’ worth under this scenario would total $7200. To that in five months would require putting $1440 monthly into that emergency savings. With after-tax income of $3000 and regular bills+savings of $1600, well, there’s $1400 of it, and coming up with the other $40 wouldn’t be a big problem, just by reducing the regular bills+savings for a brief time – five months of sacrificing an additional $40 in contributions to, say, vacation savings, not the end of the world.

    I appreciate that you may not be in a situation where this is possible – but please don’t act incredulously like it’s a scientific impossibility for everyone.

  29. 2million says:

    I agree – financial freedom is having enough wealth so that you don’t have to work unless you want to. I don’t think Trent is there yet, but he is closer than a lot of us because he finds his work a lot more rewarding and would probably keep doing regardless of his wealth ;-)

  30. Matt says:

    Nice post today. I like the way you really examine what “freedom” means. “What we’re striving for when we reduce debt isn’t freedom, but better options to choose from.” That line really hit home for me. It gives me something to think about.

  31. Tracy says:

    My problem is that this entire post is based on a false assumption – that freedom is being able to do absolutely anything you want without consequence.

    Which is, frankly, a ridiculous definition and not in the one Trent quoted. Without restraint does NOT mean without consequences! It means nobody prevents you from the *action* – not that nothing happens to you after you’re done.

    Also the whole ‘I view goals as the ultimate statement of freedom.’ – Wow. That’s just bizarre.

    Also: “Some people view goals – and particularly the plans that lead to achieving them – as a restriction on personal freedom” – Um, who are these mythical people?

    Assuming, that is, they are true, personal goals and not goals imposed by an outside source (either directly or indirectly) – although the very existence of externally motivated goals is one of the (many) reasons I have a problem with the previous goals=freedom statement.

  32. Aaron says:

    I think what Trent is pointing out is another one of those realizations that comes with achieving higher stages in developing a sound relationship with money. People who say, “Being debt free is financial freedom” or “not having a mortgage payment is financial freedom” are missing the entire point of this post. Those goals are, believe it or not, completely empty and meaningless. Who cares if you owe or don’t owe money? What are you gonna do – simply watch your savings account grow? That’s an empty goal, too.

    Why have $15,000 in the bank? The answer is the goal!

    “I want protection and security from an unexpected loss of income.”

    It looks obvious, but I see so many people who just HAVE to pay that mortgage off, and they focus on that and that alone, but then when it’s paid off, they don’t know what to do. Somehow the goal literally was pay off the mortgage, not to use that to do whatever would make them happier in the long wrong.

    What if their goal was the ability to travel, and by the time they paid the mortgage off, maybe they were too old to travel. Maybe they should have just sold the house decades before instead, and alleviated the debt that way. It all depends on the actual end goals.

    I love this post!

  33. Tony says:

    I think you are over complicating the topic. Financial Freedom means to be able to make decisions about your life without considering the financial aspect of it.

    It means working in whatever area you love (if you want to work) and not work in something you hate in order to get a paycheck.

    It means living wherever you want to live and not “close to your job”.

    It means having the car and house you like most and not the “frugal option” or the one “you can afford”.

    In summary freedom from financial restraints.

  34. Availle says:

    @#17 Chris

    I’m sorry I confused you with my reply above – I not only responded to the message at hand, but also took several other, previous posts of Trent into account. To me it seems that he’s not just choosing but fretting about every little thing in a way that does not quite fit into the “freedom” framework.

    The other week Trent posted about his computer problems: That he has a desktop with a harddisk on the way out – it’s crashing once a day. Right now he’s getting along with his laptop, but essentially he’s wondering if he should get a new Mac to replace the whole arrangement. He wants a Mac, but it’s obviously more expensive than a PC, but that one may need more maintainance, so maybe he can go on like he’s doing right now, because any choice would not be really frugal, would it?

    Some months ago we heard how his iPod (Touch?) died on him, a beloved present that he used daily and he got a lot of enjoyment and usefulness out of it. And then we hear that it would certainly be great to simply replace it, but instead he’s going to lug around five other things/gadgets, because it’s more frugal this way.

    Freedom? Really? A quote from above:
    Freedom, according to dictionary.com, means “exemption from external control, interference, regulation, etc.” Of course, there are several definitions; another is “the power to determine action without restraint. ”

    I see no freedom whatsoever. He is still as restrained in his choices as he was six years ago. Self imposed both times, only the name changed from “debt” to “frugality”.

  35. imelda says:

    Um, I’m with moom, #9 and Tony, #33. Financial freedom means you don’t NEED a job to live comfortably. I think that’s how most people read the phrase.

    This is definitely over-analyzing it.

  36. Andrew says:

    Availle–“I see no freedom whatsoever. He is still as restrained in his choices as he was six years ago. Self imposed both times, only the name changed from “debt” to “frugality”.

    Thank you! You have put into words what has been bothering me about this blog for a long time.

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