What Is The Difference Between Financial Independence and Financial Freedom (And Which One Is More Important?)

What’s the difference between Financial Freedom and Financial Independence? Sure, they sound like the exact same thing. And for that matter, we all want to be both free AND independent with our money. So does the difference even matter?

But there is an important distinction between the two. On this post, I’ll share not only what that difference is, but also which one needs to come FIRST so you can have Financial Independence, Financial freedom, and most of all, lasting Financial SUCCESS in your business!

Now, let’s get to the basic difference between Financial Independence and Financial Freedom. We’ll start with Financial Independence.

Financial independence means that you’re not depending on another person or situation for financial stability.

That means you’re not counting on a partner, your family, or anyone else to take care of your needs. You’re no longer on a “paycheck to paycheck” lifestyle, and you have control of your finances and your future.

Financial Freedom means that you are financially stable enough that you’re no longer working JUST to live.

This means that you’re free from worry about the day-to-day impact of “surprise” expenses. You’ve got enough Cash Flow going that you don’t have to worry about being blindsided by financial emergencies.

Now, here’s the important part if you want to set a foundation for lasting Financial Success.

You need to establish Financial Independence before you can create Financial Freedom.

So why does Independence come before Freedom when it comes to your money? And for that matter, do you need a certain amount of money before you can start thinking about Financial Independence or Financial Freedom at all?

Here’s what I’ve learned over the years, both in my personal and professional life.


I’ve been in the accounting and bookkeeping world for 15 years, and I’ve worked with a wide variety of businesses. We’re talking about everything from 7 figure businesses to bootstrapping upstarts. And I’ve seen everything from 6-7 figure-making entrepreneurs who constantly feel broke to startups making 30 grand a year and feeling financially abundant every day.

The bottom line here?

The amount of money that you have makes NO difference. You can start creating Financial Independence and get on the road to Financial Freedom starting NOW!

To start creating Financial Independence and eventually moving to Financial Freedom, it’s about two things.

First, it’s about matching your lifestyle to the money that you have. Then, it’s about altering your habits, steps, thoughts, and beliefs around money so you can set yourself up for the next step to your financial future.

I don’t care from where you’re starting. It doesn’t matter if you only have $1 to save. You could be thousands of dollars in debt or if you have 1 million dollars a year. You can get started, and I’ve got the first steps you need to get you on your way!

Now, grab a pen and paper, and let’s look at five steps to set yourself up FIRST for Financial Independence, so you can pave the way to lasting Financial Freedom in your business (and in your life!)

Step 1: Define your goals and intentions when it comes to Financial Independence

Let’s set your goals and get clear on your intentions. Ask yourself this question: why do you want to be Financially Independent in the first place?

What are some of the goals and intentions you might have? Everyone has their own, of course, but here are a few examples that might help you answer this question for yourself…

Maybe that you’ve decided that you don’t want to be financially dependent on anyone else (family, friends, partner, etc.) anymore, and you’re ready to get serious about striking out on your own. This is an example of a Relational goal.

Maybe your goal is very specific, like buying a house or a car, going on a vacation, investing in your education, or making a major purchase. This is a good example of a Situational goal.

It could be that you find yourself in immediate financial trouble, you want to save for retirement, or you are just plain tired of living paycheck to paycheck. This is what’s known as a Motivational goal.

So think about what your main goal is right now in seeking Financial Independence. Then, think about how that goal looks for you. How would it feel to meet that goal? What thoughts would you like to have around the situation and the goal that you’re shooting for? Write all of this down in your journal, too.

Once you’ve gotten clear on your goals and intentions, write down 3 simple steps toward those goals that you can take as soon as possible. (They don’t have to be huge steps, just a few simple ones that will move you forward, even a little bit!)

Step 2: Shift your Money Mindset about Financial Independence and Financial Freedom

Now it’s time to uplevel your mindset to meet those goals! So what is mindset?

It’s basically a collection of your thoughts and beliefs. Mindset is based on the idea that your beliefs become your thoughts, your thoughts become your actions, and your actions become your reality. You can see, then, why when it comes to shifting your mindset, it’s important how you’re thinking about your situation.

So how do you shift your mindset away from the thoughts that get in your way to the thoughts that support your Financial Independence goals?

Start by becoming an observer of your thoughts and feelings around money. For example, here are a few questions to ask yourself…

How do you feel when you check your bank account?

What does it feel like you feel when you get paid?

How do you feel when you pay a bill or buy something?

What words do you frequently use around money (e.g. calling something “cheap” or “expensive,” or using phrases like “I can’t afford it”)?

Observe how you think and feel about money, and without judging yourself for what you find. Then, decide whether or not the thoughts you observe are serving you and make changes accordingly. This is an important step because you can’t change how you attract and spend money until you really know how you feel about money. (Most of us have a lot of self-worth and guilt issues around money, BTW!)

The next mindset-shifting step is to observe how everyone around you talks about money. This could be parents, family, partners, friends, mentors, etc. This is important because the people you surround yourself with tend to influence your thoughts and feelings about money. So who do you hang out with, what do they say about money, and how does it affect you?

Finally, the last mindset exercise is to create a wealth journal. Then, for the next 24 hours (or longer if you like!), write down every form of wealth that comes your way. Every time you get paid, write it down. Write down all the things you receive (and if it was free, put a dollar value on it). Write down everything, from finding a penny on the street to finding an unused gift card to getting a nice bottle of wine from a friend.

This both uplevels your awareness for what you already have, but also your level of gratitude for everything.

Pro Tip: Struggling to shift your words, thoughts, and beliefs around money? Find out how one of my favorite tools, Money Mantras, can help you make that shift with more ease and fun!

Step 3: Create a Budget that supports your Financial Independence goals

Here’s the thing. If you want to go anywhere, you have to know where you’re starting. Then you can get to where you want to be. Once you’ve set your intrinsic goals in Step 1, it’s time to make more concrete financial goals in this step. That’s where a budget comes in!

(BTW, if even the idea of having to make a budget feels like a bummer to you, check out this post and get some tips and tricks to get past that budget making resistance!)

For this step, I recommend setting 3 goals, at least one of them short-term (i.e. a year or less). Then put a dollar amount for each of those goals. Then, create a budget that will support your goals. Finally, start tracking your spending to ensure that your spending matches your priorities!

Pro Tip: the Mint app is very useful for this purpose. It helps you track your spending and stay within your budget, while at the same time showing you where you’re spending your money. That way you can determine if your spending is supporting your goals, or if any course correction is needed.

Now, budgeting is about expenses and income. It’s the day-to-day side of building Financial Independence. Assets and liabilities, on the other hand, are about your longer-term financial picture. Which brings us to Step 4….

Step 4: Analyze your Assets and Liabilities (In a judgment-free space!)

Financial Independence is all about knowing your net worth. That is, knowing your assets vs. your liabilities. For example, houses and cars are assets, i.e. things that you own. If you have a loan against your home or your car, that’s a liability (i.e. money that you owe someone else).

To be more Financially Independent, make a plan start reducing your liabilities (the money that you owe), and shift toward building your assets. Start with writing out all of your assets and liabilities on paper and do an analysis on where you stand long-term.

Another important step in this process is to get a copy of your credit report, and see what can be resolved. Make sure your credit score is accurate, and see what you can do to boost it.

(BTW, when I got serious about Financial Independence, I ended up raising my credit score 100 points in just 5 months! Find out how I did it HERE…)

Pro tip: When you’re analyzing your numbers, take this part of the process one step at a time, and always from a non-judgmental space!

Step 5: Your Self-Worth Drives your Net Worth

We talked a little bit about net worth in Step 4. Now, what is self-worth part, and what does it have to do with net worth? Here’s how the two fit together…

Here’s the deal. If you avoid taking the previous steps that we’ve talked about here, getting to Financial Independence and hence to Financial Freedom will be a LOT harder. So the sooner you can step into a place of self-worth with money, the easier the journey will be. That’s what this step is all about!

Now, does net worth create self-worth, or is it the other way around? Here’s the truth about that..

Your self-worth drives your net worth. The more confident you are in yourself, your skills, and what you share with the world, the easier it will be to build Financial Independence and Financial Freedom.

Getting to Financial Independence is not a judgment game. Whatever comes up for you while you’re going through the steps here, don’t let it influence your self-worth. The more worthy you feel, the more your net worth will ultimately shift, and that’s the goal here!

So no “shoulda, coulda, woulda” when it comes to your past experiences with money. This is a space for you to become empowered and take the next steps forward. Remember, what you do now is creating your future experience, so choose the one that you DO want to have rather than the one that you don’t!

Now, tell me how all of these steps land with you. Do you see the difference between Financial Independence and Financial Freedom? What does Financial Freedom look like for you, and what first step do you want to take toward that Freedom today?

Leave me a comment and tell me what you’re going to do to become Financially Independent and move toward Financial Freedom!


Until Next Time,

Love, Light, and MONEY, Honey…

Kaylee