What does financial independence refer to?

Financial independence refers to having sufficient personal wealth to avoid financial support from others. This means that an individual has built up enough resources, whether through savings, investments, or other assets, that they can sustain their desired lifestyle without relying on external sources of income or assistance.

This concept goes beyond merely earning a high salary, as it focuses more on the net worth and financial security a person can achieve over time. It encompasses having enough assets to cover living expenses, allowing for freedom in spending and the ability to take risks without the worry of financial distress.

Being debt-free is also a positive financial goal, but it doesn't fully encapsulate the idea of financial independence since it doesn’t necessarily mean one has significant personal wealth or security. Similarly, relying on investments alone for income might not provide the necessary diversification and stability to be considered financially independent, especially if those investments are not sufficient to cover all of one's expenses. Therefore, the correct understanding of financial independence is rooted in the ability to sustain oneself financially without external support.