What does “financial independence” mean?

Financial independence refers specifically to the condition in which an individual has accumulated enough income or assets to cover their financial needs without the necessity of earning a paycheck from traditional employment. This concept embodies the idea that a person can maintain their desired standard of living through passive income sources, such as investments, real estate, or other assets that generate revenue.

Achieving financial independence generally means that one is no longer dependent on a job for financial security, allowing for greater freedom to pursue passions, take risks, or retire early. This broad definition captures the essence of financial stability that allows individuals to live comfortably based on their financial resources.

The other options, while related to aspects of personal finance or investment strategy, do not accurately encapsulate the full meaning of financial independence as it is understood in wealth management contexts. For example, earning a high income without a job does not necessarily imply financial independence if one's expenses require more than the passive income generated. Similarly, having a diversified investment portfolio or the capability to invest in high-risk assets pertains more to investment strategy rather than overall financial self-sufficiency.