The term “financial freedom” has been given many different meanings over the years, but here we will use the following definition: Financial freedom is a state of personal finances where you feel completely comfortable with the financial risk of starting to do that which you love to do for a living.
If you are one of the lucky few who really love their job, you just need to be financially secure (discussed in the previous post) to be financially free, but unfortunately the vast majority of people work only because they have to (not because they want to). And yes, this is a large source of inefficiency, a large drain of happiness and a major driving force behind the truly idiotic quest for happiness-through-consumption plaguing the developed world today. Doing that which you love to do for a living is the only way to solve all of these grave problems.
The exact quantification of financial freedom will depend on your situation. For families with financial dependants, financial freedom implies that the family will maintain financial security even after five years of zero-income for the family member considering a career change. As an example: by the time a 30-year-old husband in a family with $50,000 per year in living expenses reaches 35, his family will need about $150,000 in financial assets for financial security (roughly three years of financial resilience according to the graph in the previous post). If he currently contributes $30,000 per year to disposable family income, it implies that the family needs an additional 5 x $30,000 = $150,000 to qualify as financially free. The $300,000 total in this example might sound pretty strict, but you cannot take risks on the lives of those loved ones who depend on you financially.
Single people (or young working couples with no dependants) can be a little more adventurous and take the plunge when two years of zero-income will not threaten their financial security. For example, a single 30-year-old who has intelligently designed her lifestyle to live comfortably on $20,000 per year can be financially free with only about $100,000 in financial assets (3 times less than the family example). It is therefore clear that family planning and daily lifestyle expenses play a very large role in the quest for financial freedom.
One final thought: financial freedom implies that you have the freedom to produce what you want, not consume what you want. Many lottery winners have proven that instant millionaires can consume themselves back to bankruptcy in a remarkably short time, gaining absolutely no happiness in the process. On the other hand, producing that which you were born to produce (doing what you love to do for a living) will bring you true sustainable happiness and give the world an excellent product or service – a true win-win situation.