Financial independence means different things to different people. It could mean being out of debt; for others, financial independence is having an investment portfolio large enough to provide income to meet their needs for the remainder of their life. Financial independence, regardless of how it’s defined, may provide a sense of security and empowerment while providing the ability to do what you want, when you want, and maintain your desired standard of living. The various stages of life can illustrate the progression of financial independence.
According to a survey conducted by financial services company Empower, financial independence means 'making it' for the majority of Americans. The survey, which surveyed 2,000 U.S. adults, found that 'making it' meant making at least $94,000, not having to rely on friends and family for money, reaching a certain level of net worth, and contributing to a 401(k) retirement account [58fbcd84].
As Americans celebrate Independence Day on July 4th, it is worth reflecting on the meaning behind the date. July 4, 1776, was the day the Continental Congress signed the Declaration of Independence in Philadelphia, announcing the separation of the U.S. colonies from Great Britain [58fbcd84].
The survey conducted by Bankrate further sheds light on Americans' financial comfort levels and factors contributing to financial insecurity. The survey found that the average American feels they would need to earn approximately $233,000 a year to be financially comfortable and about $483,000 a year to be considered rich. These numbers are significantly higher than the average earnings of full-time, year-round workers in 2021, which was $75,203. The survey also highlighted that Americans are more than two times more likely to feel financially insecure than secure, with only 28% of Americans saying they are completely financially secure. Several factors contribute to Americans' financial insecurity, including high inflation, the economic environment, rising interest rates, insufficient retirement funds, insufficient emergency funds, high or revolving debt, and housing affordability. These challenges are particularly felt by women, Black Americans, baby boomers, Generation Xers, and residents of the Northeast and West regions. The survey underscores the growing affordability challenges that households are facing in growing their wealth. College tuition has more than doubled, and the median home price has climbed 40% over the past 20 years, while personal income has only increased by 21% since 2003 [d179ef5d].
The survey results highlight the need for individuals to prioritize financial planning, savings, and investment strategies to achieve financial security and comfort. It also emphasizes the importance of addressing systemic issues such as income inequality, rising costs of living, and access to affordable housing to improve the overall financial well-being of Americans [d179ef5d] [58fbcd84].