7 Key Signs You Can Afford To Do What You Want When You Want
Written by
Cindy Lamothe
Edited by
Gary Dudak
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There is perhaps no greater dream than having the freedom to do what you want when you want. For instance, being able to take that weekend trip, splurge on a fancy new wardrobe, or pay the tab on a large meal without worrying about your bank account.
All of these scenarios come from being financially free.
“Financial independence is a major milestone and something most desire to reach,” said Dayten Rynsburger, chief revenue officer and co-founder of Niche Capital CO.
If you can relate to that — and wonder how you’ll know when you have made it — here are a several key signs according to experts.
You Can Put All Your Bills on Autopay
“One of my personal favorite benchmarks for financial freedom is when you can place all your bills on autopay and never have to worry about an overdraft,” said Carter Seuthe, CEO of Credit Summit.
“This is sort of a tongue-in-cheek measure, but I think it works. It means you have the financial freedom to know and trust your bills are covered, and that there’s a consistent amount of money in your accounts to allow for this.”
You Don’t Have Debt
“Being debt-free, including paying off all credit card balances, loans and mortgages, indicates financial freedom as it frees up income for other purposes and eliminates the burden of interest payments,” said Michael Benoit, certified finance expert and founder of ContractorBond. “For example, if someone has been able to pay off their student loans and credit card debt, they can now use that money to invest or travel without worrying about payments.”
Jonathan Feniak, general counsel at LLC Attorney, equally notes that having a low debt-to-income ratio is a big sign. “Individuals at the helm of their finances typically have a low debt-to-income ratio. They have managed to significantly pay off their debts or maintain a credit balance that is manageable relative to their earnings.”
He added, “Not all debts are created equal. When you’ve got expensive debts like credit cards and personal loans cleared, it’s a significant step towards financial liberation.”
You Have an Emergency Fund in Place
“I would point out that having a fully-funded emergency fund, typically covering 3-6 months’ worth of living expenses, provides financial security and peace of mind in case of unexpected expenses or job loss,” said Benoit. “For instance, if someone has an emergency fund and their car breaks down, they can pay for the repairs without going into debt.”
You Have Established Savings and Investments
“When your savings account can cover an emergency expense or unplanned cash requirement without causing major disruption, that’s a good sign of financial freedom,” said Feniak.
Similarly, he says having extensive, diverse investments that can keep generating income over the long term is a positive indicator.
Your Passive Income Covers Living Expenses
Another key sign, according to Benoit, is generating sufficient passive income from investments, rental properties or business ventures to cover essential living expenses without relying on a traditional job signals financial freedom.
“I suggest choosing to leave a 9-5 job and have the flexibility to pursue other interests or travel if someone’s rental properties are generating enough income to cover the living expenses,” he said.
Rhett Stubbendeck, CEO and founder at Leverage Planning, agrees. “A clear sign of financial freedom is when you can sustain your lifestyle solely on passive income. I’ve advised clients who’ve achieved this through rental incomes and stock dividends. For example, one client no longer has to work; her investments cover all her expenses.”
He emphasized, “That’s financial freedom.”
You Can Make Decisions That Aren’t Based on Your Budget
“Another sign is making decisions based on what you value most, rather than what your budget allows,” said Stubbendeck. “I reached a point where I could support causes I believe in without second-guessing my finances.”
He added, “This ability to spend according to your passions, not your pocketbook, is a true indicator of financial independence.”
You Can Buy What You Want Out of Desire Rather Than Need
“You know you’re financially free when you can buy what you want out of desire rather than need,” said Rynsburger. “That’s not to say you’ll go on spending sprees, but the ability to make choices (take a dream holiday or buy something you’ve long desired) without being overly concerned about the financial implications.”
Ultimately, he said financial freedom means having control over your finances rather than letting them control you. “When you reach this point, spending and other financial decisions become less about the financial impact and more about enhancing your life.”
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