Financial Independence
BudgetingGlossary term
Definition
The state of having enough income from investments, savings, or passive sources to cover living expenses without needing to work for money. Often defined as having 25 times your annual expenses saved, based on the 4% withdrawal rule.
Related terms
- FIRE MovementFinancial Independence, Retire Early is a lifestyle movement focused on extreme saving and investing to achieve financial independence and optional retirement well before the traditional age of 65. Adherents typically save 50-70% of their income.
- Passive IncomeEarnings that require minimal ongoing effort to maintain, such as rental income, dividend payments, interest, royalties, or income from automated online businesses. Building passive income streams is a common strategy for achieving financial independence.
- Savings RateThe percentage of income that is saved or invested rather than spent. Calculated by dividing total savings by total income. A higher savings rate accelerates progress toward financial goals and financial independence.
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