Economy works with three basic factors: time, work and capital. Work and capital substitute each other. In essence, having enough capital enables you to quit your job and to do whatever you want. That gives you personal freedom, security, you can buy time and it gives you the freedom from having to worry about income. Doing what you individually want makes you happy.

The assets of financially independent people generate income that is greater than their expenses. A persons expenses may be at €4000 annually. Lets say they receive dividends from stocks of €5000 per year. This person is financially independent. So the persons assets, liabilities, income and expenses are crucial in determining if they have achieved financial independence. An asset is anything of value that generates income. Whereas a liability is anything that needs to be compensated later.

The person’s age does not matter with respect to financial independence. If you are 25 years old and your expenses are only €500 per month and you have assets that generate €600 or more per month – than you achieved financial independence. You are free to do what you want. Also to work in order to earn more – but then always with the option to quit. On the other hand, if you are 75 years old and earn a million dollars per year but still have expenses above a million dollars, then you are not financially independent because you still have to generate the difference each year.

The road towards financial independence for everybody: First give, in order to earn some money. Second, save as much as you can, so you can invest it wisely. With time, your capital income will replace your regular paycheck.

Carry the torch of liberty to the next level! Do you have further reasons for aiming financial independence?