Wealth and Financial Freedom

Wealth & Financial Freedom

This article is written from a retirement perspective.
Financial freedom means having sufficient wealth to support your lifestyle. How do you measure your wealth?

Wealth

What is the worth of your wealth? You have to add up the value of your properties, cars,

investments, your share of business interests, the cash value of your insurance policies

and your various bank accounts. What do you get? Assuming it is worth10 million, do

you think it is the value of your wealth? It is not. You have to deduct all the borrowings

such as property loans, credit card outstanding sum, car loans, and other loans. Perhaps

the figure comes to around 4 million. Your actual wealth or rather your net worth is only

6 million. I usually calculate my net worth on December 31.


Financial Freedom

When you enjoy financial freedom, it means your wealth is able to support your needs and wants. Let’s take the above figure as an example. When you need 5 million to achieve financial freedom and you have only 4 million worth of wealth. You are short of 1 million to enjoy your financial freedom. However, when you need only 3 million to be financially independence your wealth is more than enough to support your lifestyle. This is a very rough example without considering inflation, future earnings, and fluctuation in the value of your investments.


Wealth and financial freedom

Your wealth does not necessarily give you financial freedom and your financial freedom may not be supported by your wealth. Your needs and wants to decide the size of your wealth to give you financial freedom.


Getting financial freedom from your wealth

You have two options to enjoy financial freedom. One way is to increase your wealth to match your needs and wants. Another way is to limit what you want out of life to match the worth of your wealth.


Financial freedom or wealth

In life, we aim to go after financial freedom. You need to take bigger risks to create greater wealth. You may or may not succeed.  On the other hand, financial freedom is within your control, you can live lavishly or frugally. It’s up to you.