We achieved our goal of complete debt freedom — including our mortgage — inand so our natural follow-up goal was something even bigger, especially considering that we were no longer sending out a big chunk of our income to our lenders. The big question that many people have asked is how we are doing this. What exactly are we doing with our money? Financial Independence The best place to start when discussing investments is to look at our goals.
What else would you give up if you instead had to give up ten things? I actually thought about this a lot recently when creating the budget for The Perfect Life. After determining what Financial independence of life would make me and my wife happiest, I sat down to figure out exactly how much the perfect life Financial independence cost.
To me, financial independence is having enough income from your assets to cover your essential expenses so that you can survive without ever having to work again. Never having to work again is very different from Financial independence working again. So how can you achieve financial independence as quickly as possible?
List Current Essential Expenses The first thing you should do is list your current essential expenses. This will allow you to understand how much you spend per month and will help you better predict how much you will need to spend after you quit your job.
To keep track of your expenses and calculate how each expense impacts your time to FI, click here to download a free copy of the spreadsheet I used on my own journey to financial independence!
Predict Future Essential Expenses The number you computed in the previous step assumes your post-FI life will resemble your current life. Most likely, this will not be the case. When you no longer have to work, the number of expenses that you incur should decrease.
This step is the fun part. If you really envisage your post-FI life, you can quite happily drop expenses that are no longer necessary or important to you. Housing We currently own a house but plan on renting after reaching FI.
There are a few reasons for this: Just Enough House — Right now, we have a two-bedroom, two-bathroom house but only my wife and I live there. We bought a two-bedroom house so that we could have guests and potentially have space for a nursery, if we decided to have a baby.
For the most part, however, this second room has been unused. Renting will allow us to get exactly the right sized house for our current needs. By living somewhere like Thailand for a portion of the year, the income from my United States investments and businesses will go much further than if I lived in the States.
Renting will allow us to easily move to cheaper places, as needed or desired. Transportation Sadly, we currently require two cars for me and my wife to both get to work. Not having a car will probably result in additional public transportation costs but by cutting out automobile ownership from our future expenses, I can decrease our future monthly expenses even further!
Library books instead of TV. Running instead of gym membership. Rock climbing on actual rocks instead of on a fake climbing wall that costs money to use.
You get the idea. Why Wait Until FI? This exercise may help you decrease your current expenses even before you achieve financial independence. If you ask yourself, would I give up x if it meant I could quit my job tomorrow and you answer yes, why would you continue paying that expense now?
It is obviously not that important to you so why not remove that expense now and instead use that money to get one step closer to achieving FI? Supplemental Income for Discretionary Spending The beauty of saving enough to only cover your essential expenses is that it will force you to really scrutinize your discretionary spending after you achieve FI.
You will truly be trading your free time for stuff so you will most likely only do that for things that are really important to you. Conclusion In conclusion, here are the simple steps to achieve financial independence as quickly as possible: Record your current essential expenses Envision your Perfect Life Use your current expenses to help predict the future essential expenses in your perfect life Determine what assets are needed to provide the necessary cash flow to cover your future essential expenses see Safe Withdrawal Rate Save and invest your way to that target Enjoy FI What would you consider giving up if it meant you could quit your job tomorrow?
Want to shorten your journey to financial independence even more?“Financial independence” is a phrase often bandied about by people without any sort of consistent meaning. Does “financial independence” mean complete freedom from debt? Jun 06, · This couple is on track to retire -- before they turn Being financially independent means that income from your investments alone is enough to cover all your expenses.
How to Achieve Financial Independence and Retire Early[See: 10 Alternatives to Full-Time Retirement.][See: 10 Ways to Make Extra Money in Retirement.][See: How to Reduce Your Tax Bill by Saving for Retirement.]Festivities and adventuresPlan a retirement party.
(3 more items). Financial Independence Planning, FIP, is one of the premier financial planning firms in the tri-state area. We earn the trust and respect of our clients and peers by consistently delivering high quality, reliable, and accurate financial planning and wealth management advice and service.
Mar 06, · The conventional wisdom in our business is that you have to grow and keep moving to survive. We never grew, always stayed tiny, and it serves us very well over the years, allowing us to pick and choose projects, and keeping our financial independence from our clients.
This sounds simple, but it’s true, and is the key to financial independence for millions of people around the world. The truth is that you cannot buy your way to happiness, much less freedom.