In my studies into personal finance, I realized there is no full consensus on what financial freedom is. Some experts define it as independence - not having to work. Others describe it as freedom from worry or fear around money. Others describe it as being in control of your finances. This got me curious: What if there were not one kind of financial freedom, but different kinds?
In reading different personal finance authors, I've discovered there are at least five types of financial freedom, with some variations on some of these.
The first type is financial security. This is the ability to withstand and avoid any financial threats that may cause worry, fear, harm, or loss. It usually centers on having a robust emergency fund, robust savings, robust retirement funds, proper insurance (life, long-term care) and estate plans (wills, trusts, power of attorney, etc.). This type of freedom is the one financial gurus like Suze Orman advocate for.
The second type of financial freedom is financial peace. Financial peace comes from knowing you are doing the right things and are headed in the right direction when it comes to one's finances. Advocates for financial peace emphasize following a specific program for building savings, eliminating debt, and investing. Probably the most famous advocate for financial peace is Dave Ramsey.
The third type is financial control. This type is about controlling one's finances so as to maximize income, minimize expenses, and optimize returns. People who advocate for financial control focus on entrepreneurship and surrounding oneself with a team of experts in order to find the best opportunities and maximize as much value as possible. The most famous advocate for financial control would be Robert Kiyosaki, of Rich Dad, Poor Dad fame.
The fourth type of financial freedom encompasses what I call financial liberty - the ability to use money in order to maximize joy, pleasure, and meaning in one's life. Advocates for financial liberty focus on getting people to be intentional and purposeful about how they use money. They are focused on helping people achieve their life goals responsibly and sustainably. My favorite expert when it comes to this type of freedom would be Ramit Sethi (I Will Teach You to Be Rich).
The last type of financial freedom is financial independence. Financial independence (or FI) is about the freedom from having to work, having to depend on another for income. It's about ownership of income-producing assets that can sustain one's life without one ever having to work again. In recent years, it is exemplified by the FIRE (financial independence retire early) movement. Famous advocates of FIRE include Mr. Money Moustache and the Mad FIentist.
Which type of financial freedom appeals to you depends on your temperamant. If you constantly worry about all the bad things that could happen and whether you can survive them, financial security would likely be for you. If you want a program that sets you in the right direction, financial peace might be what you're looking for.
If you prefer having decision-making power and influence and complete say over how your finances so as to maximize return, then you probably want financial control.
If you want to enjoy life to the fullest and live on your own terms, then financial liberty might be for you. And if you want to accumulate enough money so that you never have to work again, then financial independence might be your goal.
I would wager, though, that people want a different mix of these things to varying degrees. I myself, for instance, prioritize security and control, with varying levels of interest in liberty, independence, and peace. In this case, I like to read a diverse set of authors and pick and choose different strategies that may fit my diverse needs.
But knowing about these different types of freedoms helps me understand not only where the author is coming from, but also what I ultimately want when it comes to money.