Financial Freedom can mean many things to many different people.

For me, I want to get to point where I can wake up in the morning at whatever time I please without having to worry what time the bus or train is coming, what meetings I have today or reports I need to prepare. I want to make my coffee and go for a walk or read book without having to think about when I am being paid next and what bills are going to be due. I want to be able to spend my time on my passion projects. I want to be able to go on trips or to dinner with my wife without thinking about my credit card balance. I don’t want to have a credit card, period.

Most importantly I want to be able to spend as much time as I can with my loved ones.

To me these things are what Financial Freedom is all about and I am happy to say that I have started my journey. I have it mapped out, although I know it will not follow the path perfectly, life happens, but I am on my way and I will reach my goals.

I have made it a habit in recent times to bring finances into discussions with family, friends and colleagues and I will often ask the question, “What does Financial Freedom mean to you?”. I get pretty much only get a few responses, with little variation. From what I have found the responses are totally dependent on their level of financial education.

Most of us when we are young are taught very little about finances. Growing up in Australia all I remember being “taught” about finances was the school banking in primary school. You would be given a little tin to fill with coins each week and then it would get deposited into your bank account. That was it, no real explanation as to why, apart from “it’s good to save money”. Sadly this was more of a ploy from big banks to hook you in early, they help you “save” when you are a child and give you little rewards along the way, then when you turn 18 the credit card arrives in the mail!

We are told to go to school, get a job and get in debt (buy a house, car and go holidays), keep working then buy a bigger house and a better car! We are taught to be middle class, to enter the rat race. Sadly a lot of us who enter this maze become the people who respond to the above question with “Win the lotto” and we all know that is not a great investment strategy!

If we are lucky our parents will teach us to save some money for a rainy day (actually decent advice). These people usually respond with something like “save all your money in bank, where it is safe”. Whilst this can be solid advice to a certain degree, history shows that you will not get too much further ahead than the poor “Win the lotto” guys if you don’t then take some of those savings and really put them to work with by investing them. A lump of cash is nice to have set aside for an emergency (and I am definitely an advocate for Emergency Funds) and will give you some peace of mind however the interest rates that you will be paid on your cash simply will not get you to Financial Freedom (at least not until you are too old to be able to enjoy it!).

In Australia over the past 20 years the average return for cash deposits has been 3.10% while Australian Shares have enjoyed an average of 8.7%. As you can see from the graph below if Joe Citizen had been putting away $100 a month in a “high interest” savings account for the last twenty years compounded monthly would have a sum of $344,000 in the bank, whilst Joe Blogger had been investing the same $100 in the Australian Stock Exchange for the same twenty year period he would have the princely sum of $648,000 – this represents an 88% better return. Thanks to the wonder of compounding the divide gets larger as the years roll on.

The last group of people I will mention are those that have found their way financially, usually through a mentor, be it a parent, friend, business associate or maybe even through studying to gain financial literacy (are reading blogs on the subject!). They will usually be happy to share their story on how they have mastered money through studious saving and investing and they have not allowed an exorbitant amount of lifestyle creep to eat into their ability to gain Financial Independence. Or perhaps they will tell you they won the lottery!

Of course everyone is on their own unique journey and the above is simply my experience so I would love to hear from you:

What does Financial Freedom mean to you?