Many people’s first reaction to “financial freedom” is that it must require a huge pile of money. Some say you need at least ten million, others insist it takes hundreds of millions to be truly free. But I’ve always believed the bar is much lower than that.
When we talk about financial freedom, the immediate image is “buy whatever you want, whenever you want.” But let’s reframe the question: Why aren’t we free right now? Why can’t we travel whenever the mood strikes? Why can’t we sleep until we naturally wake up? Why can’t we be with family any time we like?
Is it really because we can’t afford to shop freely? No. For most of us, the answer is two words: we work. We have to work to maintain our current lifestyle.
What Financial Freedom Really Means
The threshold for financial freedom can be very simple: when your “sleep-after income” (money you earn while sleeping, also called passive income) covers your current living expenses, you’ve made it. When you have money coming in even if you don’t work, when you no longer have to do meaningless tasks just for pay—that’s already financial freedom.
Freedom is not being able to do whatever you want; it’s being able to refuse to do something you don’t want to do. — Kant
How to Build Passive Income
How do you create sleep-after income? Rental properties, royalties, patents, or business dividends can all work, but for most ordinary people the most common and controllable method is investing. It’s also the main path I’ve taken myself.
I’ve done the math: if you save half your take-home pay and invest it at an average 10% annual return, your passive income can exceed your household expenses in about 7 years. In roughly 12 years, it can surpass your original salary.
The Biggest Misunderstanding About Investment Returns
But the immediate follow-up question is: where do you find investments that return 10% annually?
A friend once opened his banking app, sorted all the products by return, pointed at the highest one and said, “Look, the best is only 6%. Where’s your 10%?” (These days it might not even reach 6%.)
This is a very common misunderstanding: confusing “annualized 10%” with “10% every single year.”
Over the past decades there have been plenty of investments that achieved an annualized 10%, but almost none that reliably delivered exactly 10% every year. We first need to let go of the “steady XX% every year” mindset and accept the reality of volatility.
Zoom out. A 10% annualized return is a long-term average: one year you might make a lot, the next less, the third year you might even lose a little, but the average comes out to 10%.
Once we stop fixating on “how much can I earn this year” and start asking “how much will I have in ten years,” we discover there are actually many such opportunities.
But that’s not enough. If we’re only investing for growth, occasional losses are no big deal. If we want passive income to actually pay our living expenses, we have to solve a critical problem: what do we do in years when investments lose money?
So on top of investing, we need to build a passive-income system that converts volatile returns into relatively stable, spendable cash flow.
The Complete Cycle of Wealth Accumulation
After people accept the investment path, they often sigh: “Principal—nothing matters more than having a big enough starting principal!”
So how do we accumulate wealth quickly?
Some say money is earned, others say money is saved. Both are right—but neither tells the full story.
Wealth accumulation is actually a complete cycle:
- Spend less than you earn
- Invest as much of the surplus as possible
- Increase your income
- Invest the extra earnings too
- Repeat the above four steps; let time handle the rest
Every step matters. Missing one or two dramatically slows progress.
Financial freedom has nothing to do with how high your salary is; it depends on how much you can save and invest.
Principal vs. Wealth: What Really Matters
Statistics on high-net-worth Americans show that the fastest accumulators of principal are often the professions with the lowest necessary expenses—programmers, engineers, and teachers—not the highest-paid doctors and lawyers. The hidden costs that come with certain careers quietly erode savings rates.
But principal alone isn’t wealth. Principal that generates money is wealth.
Seek wealth, not money or status. Wealth is assets that earn while you sleep. Money is just a tool for transferring time and wealth. — Naval Ravikant
So we must actively invest and turn dormant principal into living wealth. One important caveat: not every dollar should be invested. Risk control always comes before return. Only true “idle money” should be aggressively invested.
Work Is the Real Engine—Investing Is the Accelerator
Another common pitfall is over-focusing on investing and the magic of compounding while forgetting that work (not just a job) is the primary source of wealth creation for ordinary people.
Ordinary investors can realistically achieve around 10% annualized returns. Warren Buffett gets a little over 20%. You’d have to be Buffett-level to double the market average.
But in the realm of work, doubling—or even 10x-ing—your income, while still hard, is far easier than becoming Buffett.
Even starting with zero principal, financial freedom is possible—because most of the wealth we ultimately accumulate comes from us as people, not from our investments. Investing is an accelerator, not the engine.
Checking Your Direction Along the Way
While grinding away, don’t forget to occasionally look up and check direction.
As we chase wealth, ask yourself:
- Is my free time increasing or decreasing?
- Is my health improving or worsening?
- Do I love what I’m doing more, or is it starting to feel like something I want to escape?
Anything worth long-term commitment should be: the more you put in, the freer you become in both time and money.
Is Ten Years Too Long?
The reality is that even with the right direction and sufficient effort, building enough principal usually takes 5–10 years. People often ask: “Ten years? Isn’t that too long?”
Before answering, I want to address the opposite extreme—people who already have plenty but still feel anxious.
Why Having Money Doesn’t Always Feel Like Freedom
I often say “10 times annual expenses is enough for freedom,” and some readers ask: “I already have that much—why am I still anxious about money?”
Many haven’t realized: having a lot of money and living like a wealthy person are two completely different things.
Part of why we want more money is mental laziness. “If only I had more money…” is the easiest excuse when we don’t want to reflect, think, or make hard changes.
— Tim Ferriss, The 4-Hour Workweek
Financial freedom on the surface comes from wealth, but in reality it comes from control over wealth, not the wealth itself.
A Cautionary Tale: Building Savings but Not a Life
There was once an enviable young couple in their twenties who started early—investing, saving, aiming for financial freedom. Two and a half years later, they unexpectedly broke up.
The guy later wrote:
“We kept planning what we’d do after financial freedom, but rarely thought about how we should live now.”
I built my savings but never built my life.
Freedom Starts Now, Not at the Finish Line
The changes financial freedom brings to life happen every day. Life is a process, not a destination.
Many discover they can start living elements of a “free” life long before reaching the final number—whether that’s more intentional rest, reading, or side projects that bring joy and even accelerate the journey.
You don’t have to wait for financial freedom to start living freely.
Real-Life Obstacles and Practical Solutions
Housing: Trade-Offs and Long-Term Alignment
In the early stages, buying a home and building principal can feel like an either/or choice. Later, they often reinforce each other.
Gaining Family Support
Prove the path works in your own life first (go from 0 to 1), then ask for support—that’s when you’re most likely to get it.
Emergencies and Illness
Financial freedom doesn’t eliminate risk, but it builds a much stronger safety system and gives far more options in crisis.
The Power of Priorities and Reframing Questions
We’ll always face big expenses or life events. The key is reframing:
Instead of “Can I still be free if I do X?” ask “How can I do X in a way that supports freedom?”
People can achieve any goal they truly want—but not every goal. — Ray Dalio, Principles
Short-term, life is shaped by environment. Long-term, we get whatever sits highest on our internal priority list.
If we keep asking “Can I still be free?”, all we’ll see are barriers.
If we ask “How do I become free?”, we’ll see solutions.
And solutions are always more numerous than obstacles.
Further Reading: How Ordinary People Can Live Better: A Practical Guide to Minimalist Living and Financial Health
