Friday, March 29, 2024

Financial Independence vs. Financial Freedom

A while back, I heard a retiree saying: "Nowadays if I like something, I don't think. I just buy!"

I think I have heard similar lines before, but this is the first time hearing it since I hit FIRE.

This is a very different lifestyle from mine, where I watch every dollar I spend and stick strictly to a monthly budget. 

So I started to think: have I really reached financial independence?

I realized there is a difference between financial independence and financial freedom. 

Financial freedom means one doesn't have to think about money anymore. He/she can buy whatever he/she wants, without worrying about running out of cash. This is the retiree above.

Financial independence means one doesn't have to work for money anymore. This is what people achieve what people reach FIRE.

I will say I have financial independence but not financial freedom. 

Next, I begin to wonder if financial independence and financial freedom are 2 ends of a spectrum, as shown above. Clearly, I am at one end but not the other.

It dawned on me that both are achievable. In fact, many retirees in Singapore are able to achieve both as they have no need to work, yet are able to spend as they like (up to a certain range of course).

In FIRE terminology, this is termed as 'FAT FIRE'. For more info, see here: 

For me, I have only achieved LEAN FIRE. 

Now, how do you define FAT FIRE exactly? What should the withdrawal rate be? How much are the monthly expenses to be considered FAT FIRE? Do I simply x2 or x5 to my monthly expenses? How long do I need more before I can achieve FAT FIRE?

These are things to think about. 


  1. Hi, it's hard to pin a figure on what amounts to Financial freedom though its clear it has to be higher than merely covering basic expenses. Lifestyle creep can easily convert someone's FAT FIRE into LEAN FIRE due to overspending.

    I am coming round to the thinking that true financial freedom occurs when you feel that you spend enough on yourself already, why not give some of the excess to help others.

  2. Yes your last point resonates with me. Coincidentally, this brings to mind a blog post I wrote earlier about meaning of life: