What is financial freedom?

1 min readLast updated February 1, 2024by Rachel Carey

Discover why financial freedom so important during retirement and how to achieve it in our financial freedom guide.

What is financial freedom? 

Financial freedom means having enough money to cover your expenses and live the lifestyle you and your family desire without worrying about financial constraints.  

It is a term closely associated with retirement, where you will grow your nest egg enough to sustain you throughout this exciting new chapter.  

Fiscal autonomy is a goal for most people entering retirement, giving you a chance to live out your golden years without the worries and stressors of financial constraints. It also means you can enjoy your retirement to the fullest without needing a part-time job to supplement your income.  

Retirement is a time in your life when you shouldn’t have to worry about your finances. You’ve worked hard your entire life and now want to enjoy the fruits of your labor without pinching the pennies.  

While it is possible, financial freedom isn’t easy to achieve. Life has a habit of throwing curveballs from time to time. Financial emergencies can come in many forms – an unexpected healthcare emergency can leave you with a high hospital bill, debt can escalate beyond your control, or your investments could take a turn for the worst.  

To overcome these hurdles, it’s important to map out your financial journey and set yourself on the right path to securing your financial future.    

How to calculate financial freedom in retirement 

Calculating your net worth is one way to ensure you’re on the right track. This is the value of your assets minus your liabilities.  

Your assets are all your retirement income streams, including Social Security, retirement accounts, and other investments. Your expenses can be everything from living costs and bills to the more exciting stuff like holidays and hobbies.  

So, where do you start with those calculations? On average, Americans spend $60,000 per year after they retire.  Depending on your retirement goals, this figure might seem a little high or low, but it gives you a good starting point to assess where you stand.  

Knowing you’ve achieved financial freedom is when your income covers your expenses and gives you the life you want without worrying about money. If your calculations are positive, you’ll be able to enjoy the financial freedom you’ve worked hard to achieve.  

Five steps to achieving financial freedom 

Interestingly, the Unbiased 2023 Financial Confidence Survey revealed that only 21 percent of adults in the U.S. felt confident about retirement planning.  

Fiscal autonomy is a goal for most people entering retirement, giving you a chance to live out your golden years without the worries and stressors of financial constraints.  

Unsure of how to achieve financial freedom? Here are five steps to get you started: 

Step 1: Make a plan 

Just as you should avoid running a marathon without months of training, you can’t expect to retire on your own terms without saving hard during your working years.  

The great news is you get to decide what the plan looks like. Perhaps more importantly, you get to define what financial freedom means to you. 

The key is to set clear and achievable goals and work towards them as soon as possible.  

So, what should these goals look like? 

They include:  

  • Where you would like to live 

While this exercise may be easier for those closer to retirement as your plans will likely have firmed up at this point, there’s real merit to starting planning when you’re young.  

Remember, it’s your plan, so even if your first draft is rough, you can fix it up along the way.   

Step 2: Review your plan, regularly 

Every robust financial plan needs regular care and attention. As we’ve seen recently, economic factors such as inflation, interest rates, and stock markets change as time moves on – often quickly and sometimes sharply. 

These can affect whether your plan stays on track.  

Your circumstances will also shift, giving you more or less scope to save and invest. You might start earning more money, inherit a windfall, or have children.  

It’s important to frequently check where your plan is in relation to your financial goals. 

This should happen at least annually, but you could do it every six months, especially as retirement draws closer.   

Taking stock of where you are will enable you to make the necessary adjustments to keep your plan on track. 

Step 3: Start saving and investing now 

Let’s not forget planning for your retirement is a marathon, not a sprint, so understanding how you expect to spend your money is just as crucial as establishing how much to save. 

Whether you've recently entered the workplace or are fast approaching the age you want to retire, the action you take right now will make the biggest difference.  

The earlier you start saving for retirement, the better, as the longer you invest, the more you will benefit from compound growth.   

There are other benefits, too. When you start a new job, your employer may offer matching contributions to your 401(k) or a different retirement savings plan. 

Making the most of this may enable you to either retire earlier or help you accrue a much bigger pot.  

Step 4: Prioritize becoming debt free 

If you have outstanding debt such as mortgages, credit cards, and loans, achieving a life free from money worries can be a challenge.  

As we’ve seen recently, interest rates can change quickly, and even though it can be manageable, debt can take a bigger chunk of your monthly income, affecting your lifestyle and well-being.  

Making sure debt is paid off before you intend to stop working is financially prudent and can bring the peace of mind that every penny of your income is yours.  

Step 5: Seek expert advice 

We all need a bit of help from time to time, especially when managing our finances. 

The financial landscape can be complicated, and making the right decisions isn’t always easy.  

Regulated financial advisers are experts in helping you achieve the future you want.  

They will take the time to learn what financial freedom means to you, take stock of where you are currently, and put together a bespoke plan to help you and your loved ones achieve your life goals.  

If you need help, it's important to seek expert advice. A good place to start is Unbiased. Here you can get matched with an independent SEC-regulated financial advisor who can ensure you’re getting the most out of your current plan and you are on course to achieving financial freedom.  

Find your perfect financial professional today.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.