Financial independence is a term that is thrown around a lot when talking about ways to retire early, and you may have even heard it referenced as F.I.R.E. (Financial Independence, Retire Early). But what does financial independence mean, and how do you get there?

Definition of Financial Independence

Financial independence is defined as having enough passive income or wealth sufficient to pay one's living expenses for the rest of one's life without having to be employed or dependent on others.

3 Types of Financial Independence, Retire Early (F.I.R.E.)

• Lean F.I.R.E. – Meets basic living expenses and is frugal in their spending habits.
• Coast F.I.R.E. – May work only to cover current living expenses, freeing you to work less or spend more on college funds, travel, a passion, or whatever you wish until you retire.
• Fat F.I.R.E. – Has a large post-retirement budget with investments that can produce aggressive returns and passive income.

How You Can Achieve Financial Independence

Procrastination is a major obstacle to achieving financial independence because we’d all rather deal with it tomorrow. Early planning starts accumulating the money you’ll need for the future, so you won’t have to play catch-up. It is possible to attain financial independence later in life—but you won’t achieve it tomorrow if you don’t start today!

Regardless of your financial situation, the first step on your journey should be planning. Be sure to check out these five things to consider when working towards your financial independence goals.