Levels of Financial Freedom

We must consider that financial freedom goes beyond accumulating wealth. Being able to claim financial freedom means having control of your finances to make decisions based on your values and goals, not out of necessity. For some, it means retiring early; for others, it represents the ability to live without being tied to schedules or specific jobs. Being able to retire early, stop working, work part-time, or have additional income that allows someone not to worry during a period without employment requires surpassing certain levels of financial freedom. These levels range from the most basic to the most comprehensive, as outlined below:

Absolute financial freedom – Passive income exceeds the cost of living. In other words, not only can you maintain the standard of living you would have while working, but you can also save and invest. This represents an absolute level of independence where passive income is so high that even with significant expenses, they pose no issue.

Financial security – This is the most basic level, achieved when passive income can cover the essential needs required to live, such as rent, a mortgage, or utility bills.

Financial independence – The flow of passive income allows maintaining the standard of living you would have while working. This level enables temporary periods without working, as expenses are covered by passive income, although limitations such as the inability to save from this income base may remain.