What’s the difference between financial freedom and financial independence?

By Bryna Howes 20 August 2019 2 min read

If you ran an informal poll of your friends in which you asked about their financial goals, you’d likely hear a bunch of different answers. Some would probably be hoping to buy a place, others would be hoping to pay off debt, and others would be trying to save.

The point is when you get down to the nitty-gritty, we all have different goals.

With that said, there is typically one overarching theme: financial freedom or independence.

However, we here at Spaceship believe that financial freedom is markedly different from financial independence — and both are an achievement. So, we decided to sit down and break down the differences so we’re all on the same page.

What is financial independence?

Jack is a 31-year-old teacher living in Sydney’s northern beaches.

In his early twenties, he went travelling — as young Aussies are wont to do — and he racked up a bit of credit card debt. When he returned from his travels, he nabbed a teaching job. He also worked Friday and Saturday nights at a bar so he could faster pay down his debt.

After six months, his debt was paid off, but he was enjoying working the extra weekend hours. It stopped him from spending too much money with friends. So, he kept the job and started putting as much of his income into a high interest savings account.

A couple of years later, Jack had enough money saved for a deposit on a studio apartment.

These days, Jack is financially independent (as per the Spaceship definition).

Jack isn’t struggling to make ends meet. Sure, he has a mortgage. But a mortgage is generally considered a form of “good debt,” as it generally helps you increase your prospects of building wealth. And he has no other debt. He pays all his bills on time, and he has enough money left over each month to add to his emergency savings and have fun on the side.

This is what Spaceship thinks of when we think of financial independence.

What is financial freedom?

Jill is a 57-year-old former investment banker living in Melbourne.

Jill went straight from university into the workforce. When she was a teenager, her parents had divorced, and Jill’s mother had to return to work after years as a homemaker. It was a trying period, and Jill made a vow to herself to never be in that position.

With every paycheck, she siphoned as much as she could afford into investments and savings. Jill bought her first house at 27, then continued to add to her property portfolio over the years by buying up investment properties and renting them out.

In her thirties, Jill married and had children, but she continued with her mission to ensure she would never be reliant on her husband for money.

By the time Jill was 50 years old, she had a solo net worth in the multi millions, which sat nicely alongside her husband’s net worth. That year, at 50, Jill decided she wanted to retire at the age of 55, so she put a financial plan in place to ensure she could.

Jill has several income streams coming in, including dividends and rental income. She has no debts. Now that her kids are out of the house, Jill and her husband are able to travel freely, go out to dinner with friends, and so on. They live a good life with no financial stress.

This is what at Spaceship think of when we think of financial freedom.

The big difference

As you can see, both financial independence and financial freedom are worthy goals. Whatever your personal financial goal is, we hope it lands you in one of these categories.

Words by
Bryna Howes Right Chevron

Bryna Howes is the Head of Content at Spaceship. She's equally obsessive about cinnamon donuts and scouring the web for great reads.

What’s the difference between financial freedom and financial independence?