What Exactly Is Financial Independence?

Wealth—not surprisingly—as well as traffic jams, marriage, and public speaking are ranked as top sources of stress by the Canadian Mental Health Association. In all likelihood, you are well acquainted with these stressors.There may not be a lot you can do about your in-laws or the five consecutive red lights you hit this morning; but when it comes to planning the most intelligent use of your wealth, there are a few things you can and should be thinking about.First, let’s clarify what “financial independence” is, because it’s typically different than what people might expect. The default thought usually relates to “the number.” How much do I need before I can…you fill in the blank – retire, sell the business, make the charitable contribution I want, etc.But financial independence goes far beyond the number you’ll need to live out your life comfortably. Real independence means looking further than your money, and putting your attention on your wealth over a much longer time horizon.Wealth involves all of your assets – financial assets, human capital, intellectual capital and know-how, key relationships, and more. The key to true financial independence is to work with your wealth in such a way that, as your earning power recedes, your assets continue growing – even after you’re gone.While financial independence starts with knowing your number, the moment you feel the freedom of that independence is when opportunities for family legacy, social capital and following your passions begin to become available to you.Although financial independence will mean something different to everyone—whether it means more trips to Europe, creating a purposeful trust for the next few generations, or simply having a comfortable nest egg—the process for achieving it will be similar for all.Here are some things to keep in mind:

1. Do the math – work through the numbers on your own or with an advisor to understand what your “lifestyle” financial independence number is (keep in mind that you may have already achieved that number)
2. List all your assets – relationships, human capital, financial, and intellectual
3. Consider how you want to see your assets grow into the future, what contribution you’d like them to make and how you’d like them to be stewarded

Life is full of stressful situations whether it be your daily commute or deadlines in the business. When it comes to pressure around wealth, the key to managing that stress is by working towards true, over-the-horizon financial independence. While there may not be much that can be done about the person who cut you off in traffic this morning, the opportunities that come with financial freedom may help make the ride a lot smoother.