The Three Most Amazing Types of Freedom

Debt freedom, location independence, and financial freedom ... these are the three stages of freedom, and here's how to snag them into your life.

Debt freedom, location independence, and financial freedom ... these are the three stages of freedom, and here's how to snag them into your life.

You can smash almost any limit.

You can escape the cubicle. You can fire your boss. You can overcome your internal self-doubts.

You can sculpt a flat stomach, make dozens of new friends, and speak a foreign language. Heck, you can even learn to dance.

Limits don’t apply to you.

Well, most limits.

Unfortunately, there’s one limit that we can never shatter: our time on this planet. Time is our most limited, and therefore our most valuable, possession.

Yet the majority of us are trading that precious resource, time, for something that’s near-infinite in quantity, money.

That’s unsustainable. Keep it up, and we’ll exhaust our supply of time.

But there is a way out.

You see, money is a renewable resource. It can automatically regenerate itself. Money is self-sustaining.

Time is not. It’s limited, it’s non-renewable, and once it’s gone, it’s gone forever.

Rather than trade time for money in perpetuity, it makes far more sense to momentarily trade time for money, and then harness that money into renewing itself.

Lather, rinse, repeat. Soon the money will sustain itself enough that our time becomes fully ours again.


But we can’t quit the time-for-money trade tomorrow. Freedom comes in stages. And that’s why I’d like to chat about three types of freedom:

  • Debt Freedom
  • Location Freedom
  • Financial Freedom

Stage One: Debt Freedom

This variety of freedom is self-explanatory. When you experience Debt Freedom, you don’t owe a dime to any lenders. Screw you, MasterCard!

Many people describe Debt Freedom as the day that they felt a massive, crushing weight lifted off their shoulders.

I applaud them, but I have to admit, I’m also a little bit befuddled by that description.

Because even after you’ve achieved Debt Freedom, you still have the rather irritating responsibility of needing to feed, bathe and clothe yourself and your family. And unfortunately, you must resort to the dreaded time-for-money exchange to achieve this.

That’s why the quest for freedom can’t stop here. Debt freedom is the starting point on a much longer journey …

Stage Two: Location Freedom

Location Freedom is the ability to spend your time anywhere on the planet, anytime you have a hankering to travel there.

Want to explore the jungles of Borneo next week? Sip coffee in Paris? Snorkel the Great Barrier Reef? You got it.

You live in the 21st century, you lucky duck, and that means that you possess more location flexibility than any human being at any point in history. You have cheap airfare + ubiquitous internet connectivity at your disposal, and by golly, you’re not going to squander that opportunity.

Location Freedom is a stepping stone. Some people leap from Debt Freedom to full-fledged Financial Freedom without experiencing this intermediate level along the way. They trade a few grueling years of shackled hard labor in order to fast-track a lifetime of passive income.

Other people, myself included, cultivate Location Freedom to make those intervening years more enjoyable. We tend to prefer “multiple mini-retirements” throughout every stage of life.

Stage Three: Financial Freedom

Financial Freedom is the ultimate independence. You no longer need ride the time-for-money carousel.

At this point, you can do anything you damn well please. If your job is your life’s mission and calling, and you’d love nothing more than to continue working, you’re free to continue working. Likewise, if you want to move to Tahiti and read books on the beach all day, you’re free to do that as well.

Here’s Where We Get Nerdy …

Now here’s a head-scratcher: Are these consecutive levels, like you’re advancing from freshman to senior year? Or can you leap from one stage to the other as though you’re playing hop-scotch?

I’ve laid these out as stepping stones that gradually carry you across the freedom spectrum. Like this:

Debt freedom, location independence, and financial freedom ... these are the three stages of freedom, and here's how to snag them into your life.

(Yeah, I hand-drew this. Because I suck at Photoshop.)

But some people say all three are independent of one another. You can hopscotch from one stage to another.

Kinda like this:

Debt freedom, location independence, and financial freedom ... these are the three stages of freedom, and here's how to snag them into your life.

Who doesn’t love a good Venn Diagram? (C’mon, humor me.)

Who’s right? I’m don’t think it matters.

People can get stuck spinning their wheels about Awesome Life Theory. They’ll spend an hour debating between the four types of retirement. Or they’ll argue that this whole model isn’t scalable because “if everyone ditched the cubicle, our economy will collapse.”

They’ll postulate and rationalize and absolve themselves of any need to improve their station in life. Then they’ll battle rush-hour traffic, sit in a crummy cubicle with a flickering florescent light overhead, and fume that the cards are stacked against them.

Instead of debating Awesome Life Theory, how about taking some action? Pay an extra $200 towards your debt. Negotiate with your boss to work remotely every Friday. Put $100 into a dividend stock fund. Toss an extra $400 into your savings accounts. Read one book about how to buy a rental property. (Better yet, buy the damn property).

If conceptualizing the three stages of freedom as a linear 1-2-3 progression motivates you, then embrace that worldview. If conceptualizing the three stages as a Venn Diagram / game of hopscotch motivates you, do it. If adopting a totally different paradigm lights a fire under your butt, then go for it.

Just don’t sit around debating the minutia of awesomeness.

Instead, take action. Start smashing limits. Start building a big ol’ heap of savings. Start negotiating with your boss, or building your side business, or buying some investments.

Reclaim your time. It’s all you’ve got.


  1. says

    I have semi-retired,working just 2 days a week (mon/tues),i rely on my investment inc to enjoy life,i have very little debt as i have tried to pay it off asap.A lot of people think im lazy,i think there jealous.

    • says

      I am in the same boat. I work 2 days a week at my job and have 4 rentals. Most people think I am also lazy and yes they are jealous.
      Right now I am working on paying off my real estate and leaving my job.

  2. says

    I <3 a good Venn Diagram.
    I do think it's impossible to be Debt and Financially free and not be Location Free. LF can be had early if you choose the right career, but otherwise comes when you hit the other two- I don't think you could be debt free with passive income and be truly stuck in one spot. A retiree may have a house and be tied to a current city by family or other ties, but with no mortgage/debt and sufficient passive income they could jet off to Japan if they wake up one day and decide to.

    • says

      @Anne — Yeah, I scratched my head a little about how a person could be debt-free and financially-free but not location independent, and I ultimately came up with three explanations: (1) they’re held to one spot because of family/social obligations; (2) they’re held to one spot because of visa/passport issues; (3) they’re held to one spot because they’re financially free in a particular currency that doesn’t translate very well when they journey into the rest of the world. (e.g. They’re financially free in Malaysian ringgit, but that doesn’t afford them the opportunity to translate that cash into Euros, Dollars, Pounds or even Thai Bhat.)

      That said, most Afford Anything readers are American or Canadian. And I believe that most Americans and Canadians who are financially-free and debt-free would also be location independent. :-)

  3. says

    Love this. I think it’s a great analogy and a great way to look at it. I do think it would be hard to be Financially Free, but not debt free. You can’t reach financial independence without losing those creditors on your back.

  4. says

    One thing I postulated differently was that health is a key component and more valuable than time. Once you start trading health for time you enter the same spiral as credit card debt. And without health you don’t have time.

    That and Maslows heirachy of needs makes an interesting read.

  5. says

    Fascinating. Like you said, time is finite and our most precious resource so I’m trying as hard as I can to acquire it in the shortest amount of time, so that I can have much, much more of it! 😉

    It seems the only real “short cut” that exists (that I’ve found) is to use other people’s money, or leverage. Sure, you could try investing your way to freedom with every last dollar you earned, but it’ll sure take you a whole lot longer…. what’s your take on this?

    With rentals, one strategy I’ve heard (and may utilize someday) is to leverage up initially and build a substantial portfolio. Since each property cash flows (assuming you bought it right!), you’ll get to the point where the cash flow is sufficient to allow you to walk away from that cube. Over enough time, the appreciation and principal paydown would allow you to sell half the portfolio to pay off the loans in the remaining half. This would be good when you get older and want to be debt free (less headaches). This way you can have it all: debt free, location independence and financial freedom!

    • says

      @FI Fighter — I’m a fan of “leverage in moderation.” I think that a reasonable amount of leverage in the beginning is okay, IF (and only if) you have enough positive cash flow to make the payments on your leverage plus retain a huge ol’ chunk of “just in case” cash savings.

      Some friends of mine became very wealthy during the 2002 – 2007 real estate bubble by buying a few dozen properties, letting them all appreciate in value, selling half, and using the gains to pay in full for the other half. When the bubble popped, they didn’t care, because they had already paid-in-full for the other half of their investments, and therefore they were simply enjoying the monthly cash flow, regardless of the value of the underlying asset.

      I don’t know if the market in the next 5-10 years could support this strategy. Instead, I’d advocate a complete buy-and-hold position, in which you pick up rental properties that create huge monthly cash flow, large enough to let you use your profits to accelerate your leverage paydown.

  6. says

    Awesome! Not sure my Venn Diagram would look exactly like yours but I’m right on board as far as time as our most valuable, limited resource!

  7. says

    This is a very cool idea, and exactly what my husband and I are trying to do. We have an added bonus: he’s an EU citizen as well as an American one, which means we have a lot of flexibility as to where we can go or live. Now, if only we could get that debt paid down faster…

    • says

      @Michelle — That’s a great advantage!! I’m close friends with a couple that’s also a U.S. citizen married to an E.U. citizen, and I’m totally jealous of their flexibility. :-) Keep working towards that debt freedom. Ruthlessly slash every expense that doesn’t matter, so that you can spend lavishly on the dreams that are most important. :-)

  8. says

    I’m completely with you on this, Paula! We’re debt-free and currently only somewhat financially free and location free, but we’re getting there. I love geeking out on those diagrams, btw. Easily the best images I see online today. 😉

  9. says

    Hello Paula, I’ve enjoyed learning about the way you have leveraged property to build passive income. In my area real estate is valued too high relative to the rental income for this to be a good strategy. Are there other asset classes you are aware of that can be exploited in a similar way?

    • says

      @Jack — Honestly, I think leverage is dangerous. I embrace a modest amount of leverage for rental properties, for the same reasons that many people live debt-free except for a mortgage. But I’d be very wary of using leverage in other investments, such as a business, unless that business has clients with signed contracts and needs a short-term loan for the capital to perform the work. (e.g. If your company has signed a contract with a client, but needs to buy a forklift in order to do the job.)

      If I wasn’t buying rental properties, but I wanted passive income, I’d do three things: (1) pour my money into index funds that pay a high dividend; (2) build streams of passive income online; and (3) start issuing private loans through peer-to-peer lending companies. Among these three options, I’d concentrate my attention on #1, buying dividend-yielding index funds.

      If you had $1 million invested in index funds, and you withdrew 4 percent annually (leaving the rest invested for growth and keeping-up-with-inflation), you would have $40,000 annually to cover your living expenses. You’ll live like a King if you spent that money in an exotic location like Thailand or Bali. Or if you want to stay in an expensive nation (like the U.S., Canada or Western Europe), you could add that to any supplemental hobby income that you might have, such as 5 – 10 hours per week of tutoring, and live a pretty independent and rich life.

      The tough part, of course, is building that initial $1 million in investments. That can only come from ramping up your earnings, and shoveling that extra money into investments. Remember, the more you invest, the more your money grows upon itself, so over time this process gets faster and easier.

  10. says

    My wife and I have achieved location freedom, in fact we are getting ready to move soon. However we don’t yet have freedom from debt or from the need to worry about our finances. Awesome diagram, and we are going to try and put ourselves in that sweet spot.

  11. says

    When people feel the crushing weight of debt removed, they are happy to continue to exchange time for money. If you follow the path: DF –> LF –> FF, then the need to exchange your time for money doesn’t feel as difficult.

    I actually think that just like money, time can be compounded and enable us to reach FF much quicker than expected. I recently (as in two days ago) finished some work on a duplex. The work took me 500 hours. This was in addition to my day job, so the work stretched out over eight months. Most of my coworkers kept saying “Why in the hell are you doing this? Come out for a beer/soft ball/?? rather than work on that dump.” The duplex is now rented and cash flowing $650/month, which is over a 11% ‘raise’ for me. I’m one of the vice presidents, so I know the extra $650/month would be much more than 11% to their paychecks, but they preferred the beer and softball.

    My 500 hours, compounded over a few years will yield more than the 500 hours spent any other way.

    • says

      I love that example, Liam! “500 hours, compounded over a few years …”

      Yes, time can create its own “compounding gains” just as money can. I spend many, many weekends working on my rental properties, and I know that those hours invested will pay major gains for decades to come …

  12. says

    Great article! I love me some Venn Diagrams – especially when there are 3 circles :-)

    This reads much like the 4-hour work week. Have you read that? I’m working a little bit on all three circles right now. We’re reducing debt, investing heavily, and potentially selling our house so we can downsize or rent vs. own.

    • says

      @MoneySaving — I love the 4-Hour Work Week. I’ve read it twice and I keep it around for reference / inspiration, especially when I notice that I’m not outsourcing enough. Good for you for working on all three circles! You can’t go wrong with cutting debt and investing heavily. :-)

  13. says

    I feel that most people are hesitant to even begin living or striving for any freedom. They do not have a plan and continuously take on a bad cycle of new debt every time they release an old debt. I am striving for FI and I hope to be there in ten years. Thanks.

    • says

      Breaking out of that debt-cycle is one of the BEST ways to achieve FI. Once you no longer have to make payments, you’re free to spend a little bit on your cost-of-living and pour the rest of your money into investments. Keep at it … it sounds like you have a solid plan, and I bet you can reach FI in 10 years. :-)

  14. says

    Maybe my favorite venn diagram ever. I am bookmarking this because, while I work from home, we are not really taking advantage of the the location freedom yet. Once my wife graduates with her degree, maybe we’ll get pretty creative with the locale.

    Thanks again!

    • says

      Awesome!! No problem — I’m glad you like it! Just knowing that you have location independence is pretty awesome (even if you choose to stick around in one spot). I’ve been parking myself in Atlanta for the past 3 years, but I love knowing that I can hop in my car at any minute, drive to Anywhere, and stay there as long as I want. That knowledge is freeing.

      Sounds like you’ve got Location Indy and your wife is pretty close to getting it, too!! Good for you both!!

  15. says

    Bad ass Venn diagram, miss. I have the financial freedom, and basically debt freedom (could be paid off 10x over from the investment portfolio, but who prepays 1.99% debt??). Location freedom? Sure, but a house is cheap to maintain. Working on a few months abroad sometime soon though. Location independence can be a little tricky with a family.

  16. says

    I just discovered your blog and want to say thank you for writing this post. I’ve never really thought my time as being a non-renewable resource and money as a renewable one. But you are exactly right! It’s so spot on, I’m ashamed to only see this now, although so happy that you’ve opened my eyes.

    • says

      Thank you, Sean, and I’m glad that you found Afford Anything. This website is a gathering spot for people who value their time more than money, so keep coming back to read more about this powerful idea.

      Also, check out this post; it summarizes the concept that Afford Anything is based around.

  17. says

    For many M-F workers letting go of the daily/weekly norm is extremely difficult. The way to plan an escape from the daily norm is to continue working in ur 9-5 job however prepare a plan to transition into your new business and while doing that have a saving plan.

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