Happy Financial Independence

Phenomenologically, financial independence is a state of mind where a financial entity (such as an individual, a family, or a business) can direct its own course without feeling constrained by financial considerations.

In an absolute sense, the financially independent entity no longer experiences financial greed or fear (i.e. cannot be bought at any price, nor be deterred by any price), as its decision-making process will consistently ommit the financial variables (costs & benefits) when weighing between alternatives.

In a pragmatic sense, the financially independent entity may still be sensitive to financial incentives and risks, especially if a cost or a risk of loss is great enough that it may jeopardize the very assets required to sustain the state of financial independence, or if a benefit or a risk of gain is great enough that it may offer the possibility to rise to a greater level of financial independence, thus allowing an increase in baseline consumption. However, if financial independence is understood as being a single absolute state (as described in the previous paragraph), layered levels of financial independence are then a contradiction in terms.

Mathematically, financial independence is a state of wealth where a financial entity (such as an individual, a family, or a business) can self-finance, usually because it possesses assets that either (a) generate a stream of income that sufficiently satiates the entity's consumption needs and/or (b) are sufficiently large that they cannot entirely be depleted by future consumption. Because consumption needs are subjective and vary greatly between entities, the level of income-generating assets required for financial independence will also vary accordingly. Also, because satiation is another subjective metric, some entities may only include their basic survival needs in that definition, while others may also include less important needs, and possibly some of their wants, or even all of their wants.

In any case, the requirement for a satiation point indicates that financial independence is a finite goal state and may be incompatible with the never-ending pursuit of additional wealth. Indeed, the value of income-generating assets required to reach a state of financial independence can be expressed as a precise dollar figure, even though this figure may depend on the entity and its desired future consumption stream.

Financial independence is frequently cited as a financial goal, which, once achieved, becomes the means to another end; usually the pursuit of activities that need not be contingent upon financial rewards.

Financial independence is also referred to as financial freedom.

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