Once I’d studied up on the subject it was almost a no-brainer that this is the ideal financial path to follow for myself. I think that goes for the majority of people once they understand the core fundamentals of Financial Independence (FI). Before we go down the list of my own reasons for FI, let’s discuss what the hell FI is to begin with.
Think about the monthly expenses in your life currently. Here’s some numbers I just made up for the purposes of this example:
- Rent/Mortgage + Utilities: $1,400
- Food/Dining: $300
- Car Payments/Insurance: $300
- Entertainment: $200
- Health/Dental Insurance: $150
- Misc Needs (Household items, etc): $300
- Student Loans: $150-$300. Optimize the payment of your student loans with this list of calculators from LendEdu!
- Total Monthly Expenses: $2950 ($35,400 Annually)
Take a look at your bank account right now. Then think about what would happen if you had to pay for all of these things without any other cash flow. How long could you last?
- A year?
- 6 months?
- A couple months?
- A couple weeks?
- I’d be taken out back by a guy in a suit with a wooden club just thinking about it?
Regardless of where you stand on that list, one thing is for certain. You NEED some kind of cash flow in order to get by for an extended period of time. In most cases, that solution is through getting a job. There’s a reason why the standard is to look for a job right out of school and THIS is it. Maybe you’ll take a year or so off to travel prior to settling down, but eventually you will settle down.
What is it like to not have Financial Independence?
The SECOND you begin working for a wage to pay your expenses you are Financially DEPENDENT on this employment. Depending on your lifestyle, it can start to feel like your well-being depends on that deposit every second Friday. For those unfortunate enough to literally be living paycheck-to-paycheck, this is a prison sentence.
For those that can save up two to three to four hundred extra dollars on top of their expenses each month, a small light begins to show itself at the opposite end of the tunnel.
Eventually this person will have built up enough surplus to be able to live off those savings for an entire year without having to work if they really had to. Theoretically, if you’re able to either reduce your expenses or increase the amount you’re saving, you should be able to bank up enough money in order to live off of those savings for the remainder of your life. We can do so through the power of investing.
This means you’d no longer be DEPENDENT on the payment each week from your employer to satisfy your needs each month. Food, Shelter, Health Care, Transportation, Entertainment: ALL of it taken care of by what you’ve saved up. This is what it means to be Financially Independent.
So again… why choose Financial Independence?
I think Financial Independence can mean a lot of different things to a lot of different people. To some, like myself, it can mean a breaking off from the chains of the corporate workforce. I just know I won’t be content with being a worker bee in another hive. To others it might be protection from worry. Solace from the fear of possibly not being able to provide the next month for yourself or your family.
I believe that regardless of your reason for FI, it will always put you in a position of power or control of your own life and overall confidence in yourself. Empowering you to make decisions for your day-to-day life that YOU want to make.
It gives you the freedom to spend your life in a way you deem fit for yourself. In my case, I don’t feel passionate nor subsequently motivated to do work at the beck and call of another. It’s an extremely common recurring theme in the FI community. I imagine it’s why a lot of us were interested in it in the first place.
“Work Sucks.. I know” – Tom DeLonge
Maybe it’s because I’m young and am only really just starting my career, but I have a hard time seeing myself doing this for an extended period of time. It’s an experience that can really drain you of passion and willpower. But maybe I just haven’t found my own true “calling” yet either. Though that’s another story altogether.
I think a lot of people go through life doing something they’re not super passionate about, but just do it because they’ve been sucked into a lifestyle that requires a high paying salary. Unfortunately, sometimes it’s easier to keep your soul sucking job that than it is to change things up. Sometimes they aren’t even aware there’s another option.
There are a multitude of things I want to try in my life and my desire is to be able to get to all of them. I want to have the time to do that without any commitments that I haven’t selected myself. Getting rid of the office 9-5 through FI is step 1 in that for me.
Okay.. That’s great and all, but how in the world can someone like myself even reach that goal? Isn’t this for independently wealthy folks?
The numbers above are missing a lot of assumptions and key facts about maximizing ones finances. There is a relatively large number of personal finance bloggers out there who’ve already done the math behind this stuff and it’s all really quite astounding once you take the time to read through it. The great thing is that your time until FI is a simple function of how much you spend vs how much you save.
Mr Money Mustache, is an idol amongst the Financial Independence “movement” due to his contagious enthusiasm for improving oneself through frugality. After the first article I read from his blog, I was hooked immediately and went on to binge read through the full list of posts like it was The Office on Netflix. I would highly recommend that someone interested in FI do so as well, but his articles work for themselves and you definitely won’t need my recommendation after the first read through.
There are a bunch of other blog recommendations I could make as well, (which I’ll likely add to a sidebar or something) with varying degrees of frugality, all of which are powerful motivators and full of great financial and philosophical lessons for the path to Financial Independence.
Is FI for you?
The real thing to find out is whether this mindset shift is right for you. For me, it was as simple as realizing that I could make my way out of the rat race earlier than most, simply by living a more frugal lifestyle and by having an amazing head start from learning about it so early. For others it may require some more difficult hurdles to get there.
But I think that regardless of one’s end goal, be it retiring before 60 (or 50, or 40!) or just having the peace of mind of a safety cushion, we can all benefit from understanding and planning our finances better and we’ll be doing just that throughout the blog. On top of other fun stuff!