What is financial freedom?

Financial freedom is something that many of us aspire to. But what does it mean exactly? Though the financial world might tell you otherwise, here at N26, we think financial freedom looks different for everyone. And the path you take towards getting financially free can depend on your personality, lifestyle, culture, and your short- and long-term goals. Here, we’ll dive into some different ways to think about financial freedom, what might stand in your way, and a few steps you might take to achieve the financial freedom you’re longing for. Let’s go!

Good question. The answer? It depends on who you’re asking. Some will tell you that financial freedom is having enough wealth to never have to think about money again. But freedom means different things to different people. It depends on lots of factors, including your goals, lifestyle, location, and age. 

To get you started, here are a few criteria for thinking about what financial freedom looks like for you:

• Having a dependable income and feeling in control of your finances
• Being on track to meeting your financial goals
• Having enough money saved up in case something goes wrong
• Having enough cash to enjoy a particular lifestyle

What all these add up to is a general sense of financial wellbeing and confidence—having enough to do what you need and want, without worry or stress.

That’s our broadest definition of financial freedom: being able to easily manage your money and life in the way that works best for you.

Can money buy you freedom? Not exactly, but it may give you the resources you need to feel more comfortable and content. For some of us, feeling financially free means having enough money to cruise through the Caribbean on a yacht. For others, it’s being able to afford the creature comforts, or simply having the cash flow to do the things we really enjoy. 

Some of us strive to buy a home, while others are happier traveling the globe. Some want to work hard and save heavily to be able to afford early retirement, while others prefer to use their cash to enjoy the here and now. On the whole, it’s about being able to make choices that feel true to ourselves—without fearing financial fallout. 

To give you a framework for arriving at your own unique definition of financial freedom, here are a few things worth considering:

One critical aspect of freedom—financial or otherwise—is the ability to make the choices that are right for you and the life you want to have. This could mean having so much money that you can choose to use your time as you want. But that’s not the only way: The freedom of choice might mean rising through the ranks in your field to take your pick of high-paying jobs later on. Or, it might mean pursuing a passion as an artist, teaching abroad, or working for an NGO. You might prioritize a career that allows you to start a family, or choose to work as a freelancer on projects that inspire you. The fact that you’re in a position to make a choice is empowering—and that’s one major kind of financial freedom. Plus, it means that you can make decisions that feel meaningful for you, and build your money-management style around your values.   

While some value spontaneity over stability, a sense of security is something most of us seek in one way or another. From a financial perspective, security could be having a stable, reliable income over the long-term. It could also mean having enough money saved up to cover emergencies—or to comfortably care for your children and other family members who may need support. For other people, security goes further, like investing in owning a home, contributing heavily to retirement savings, or having sources of passive income, such as investments or rental property. No matter who you are, it’s worth asking yourself what makes you feel secure, and taking the financial steps to get yourself there. 

Craving the rush of something new? For many of us, adventure and exploration are a key part of feeling free. Whether it’s traveling for work or pleasure, kicking off an exciting new career, or taking time off to explore the world or pursue your passions, integrating adventure into your life may be your path to happiness. Whatever it looks like for you, it’s helpful to think about how financial freedom can offer you a sense of adventure. You might opt for a career that allows you to see the world—either for business travel or via remote work. Or, you could save diligently each month towards an extended vacation, sabbatical, or early retirement, and then head off to explore the world.  

What makes you feel comfortable and at ease? Some people may define comfort as having enough money to make purchases that make them feel happy and cozy, while others might define it as having enough money in the bank or retirement funds to feel at ease with their living standard. Do you feel more comfortable on the balcony of an urban apartment, or on a cozy sofa in a countryside home? Does the flexibility of renting appeal to you, or is the prospect of home ownership more comforting? Defining what comfort means to you and how it intersects with your financial goals is a valuable exercise—no matter what life stage you’re in. 

For us, being able to spend your time how you want is pretty darn important when thinking about financial freedom—at your job, with your family, on the road, and anything and everything in between! How you spend and save are important aspects of this. Let’s say you dream of retiring in your 40s or 50s. Maybe you work hard in the early years of your career to get the payoff of spending your time as you wish later in life. Maybe you choose a day job or part-time work that gives you more time now for your passions—or you decide to work remotely so that you can spend your time traveling to other places. 

At the end of the day, financial freedom is about balancing your needs and wants with the money you currently—or hope to one day—have. Then, it’s setting goals to achieve the kind of financial freedom that matters to you, whether that’s more time, more security, or more adventure. The good news? There’s no right or wrong—just many different ways to imagine a good life! 

In a perfect world, everyone would have enough money to stay happy and healthy and avoid financial stress. But we know all too well that our world is far from perfect, and many factors can get in the way of financial freedom. 

In wealthier countries, a larger number of people have opportunities that lead to greater financial freedom, such as inherited wealth or access to education. People living in the Global North often have an easier path than those in the Global South, where economies can be smaller and less robust. The situation is complicated, but it’s important to note that many people are at a financial disadvantage through no fault of their own. Even within countries, location impacts your cost of living, education, and job prospects. For example, urban areas typically have higher paying job opportunities than rural areas do—although they’re also much pricier to live in.

No matter where you live, your socioeconomic status can impact your path to financial freedom. Anyone kicking off their adult life with a bit of help from their parents and a good education has a better chance of achieving the financial freedom they’re striving for than someone without these benefits. And, despite some promising steps forward, inequality is still a major barrier. Financial freedom can be harder to achieve if you’re a person of color, a woman, a member of the LGBTQ+ community, or if you’re disabled—all the more reason for all of us to fight for a more equitable world! 

Even when you’re on a promising path, our world is full of volatility that can impact your finances. Stock market crashes, inflation, geopolitical conflicts, supply-chain issues, and more can all wreak havoc on the global economy. In the most extreme situations, these kinds of global disruptions can lead to very real challenges for individual people, like job losses, housing market crashes, lost value for pension funds, and much more. 

It would be easy to get stuck on the doom and gloom, but part of achieving real freedom is knowing what you’re striving for and what you’re struggling against. That way, you’re better equipped to make informed decisions within your unique circumstances.

After everything we’ve discussed about financial freedom, it’s clear that there are lots of different ways to enjoy it—and no two approaches look alike. That said, there are things to keep in mind that will help you avoid some common financial stressors and find a more empowered approach to managing your money. Whatever kind of financial freedom you aspire to, here’s a list of things you may want to take into account:

• Define your goals. Figure out what you want your life to look like, and how much money you might need to achieve that dream, both in the short- and long-term. 
• Eliminate any high-interest debt as quickly as you can. Debt is a party pooper—especially credit card debt that costs you tons in high interest. If you’ve got this or any other kinds of debt, try to pay it off as quickly as possible to set your mind, and bank account, free. 
• Save for emergencies. Life happens—and when it does, it’s best to be prepared with at least three months of living expenses saved up. Unexpected costs like household repairs, medical emergencies, or a broken-down vehicle can hurt you financially, so do your best to keep some money aside just in case. 
• Contribute to retirement funds. Whether you want to keep working forever or want to travel the world as soon as you hit 60, planning for retirement is an important part of securing your financial future. Take advantage of employee retirement schemes, or set up your own investment portfolio to grow your savings.  
• Buy your own home. This might not be an option for everyone, but if you can swing it, investing in your own apartment or house can be a great way to build wealth. You’ll save on housing costs as you age, and have something to pass on if you have children. 
• Invest what you can, whenever you can. One path to financial success is to generate passive income. This could be earnings from rental properties you own or money accumulated in investment accounts. Though it comes with its own risks, investing can be a great way to build wealth. 

At N26, helping you achieve financial freedom is our priority. That’s why we’ve built accounts for every type of lifestyle. Want to live and bank your way for free? Then try our Standard account and get a virtual card for use online and in stores—as well as three ATM withdrawals anywhere in Europe and all our top security features. Or, opt for a premium Smart, You, or Metal account to take advantage of our signature budgeting tools like Spaces sub-accounts and Round-Ups. Why wait? Check out our plans and find the account that’s right for you today.