Now that July 4th festivities are over, perhaps it is a good time to kick back and start taking stock on this question: What does financial independence mean to you and your household?

There is no one right answer. The value in the exercise is it should help you find the path toward achieving your goals even if it takes several years.

For many people financial independence is synonymous with living debt free. Everything paid off. They have typically learned the hard way that it’s easy to fall into debt and much harder to eliminate loan payments.

Yet for other people debt isn’t a negative. Instead, it is a tool that helps them achieve their definition of financial independence. For example, they will willingly borrow if it hastens earning a certificate or diploma that allows them to pursue the kind of job and career that they believe offers prospects for both meaning and money. Financial independence is the ability to switch jobs.

Financial independence for a minority is retiring in your 30s. If that is you, check out the blog of Mr. Money Mustache. He and his wife worked in the high-tech industry and did reasonably well. They lived a lifestyle about 50 percent less expensive than their peers and invested the difference in low-cost Vanguard funds. The family of three spends an average of just $24,000 a year living in Colorado, according to a New Yorker profile.

One last thought to toss into the idea mix. Financial independence can mean turning a passion or a skill into part-time income. An entrepreneurial side gig is also something of a safety net if you lose your primary job. Micro-entrepreneurship gives people a measure of control over their fate in an unstable economy.

To me, financial independence is creating a margin of safety. A healthy household balance sheet is a safety net against trauma and tragedy, but it also allows for pursuing intriguing opportunities when they come along, to take risks that might open up a more satisfying career. Safety and opportunity, like risk and return, are two sides of the margin-of-safety coin.

Obviously, there are many paths and different meanings to the concept of financial independence. Even though introspection is critical, conversations with your connections will help you hone your thoughts. Talk about financial independence with your network of colleagues, acquaintances, family and friends. Your network can help you decide a practical path toward financial independence for your household and ambitions.


Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.