Financial independence… That wonderful thing that happens when your passive income equals or exceeds your expenses. It takes a sizable amount of money to get there. How much exactly? 25 times your annual expenses using the 4% percent withdrawal rule. For me and my family, annual expenses are about $29,000, so I would need at least a $725,000 portfolio in order to reach financial independence. In other words, the ultimate freedom costs $725,000 for us, and that’s what Elisa and I are working towards.
What Do You Mean It’s Not About the Money?
Clearly, money is a key ingredient to financial independence. However, money is just a tool, not the end goal. At the end of the day money is just a medium of exchange. Most people in the developed world earn plenty of it. Sadly, most people also exchange that money for a consumerist lifestyle where cars, gadgets, and other adult toys suck away all of it. Such a life style leaves people chained to their jobs for pretty much all of their lives, whether they want to be or not.
As much as I’m looking forward to start my new job, I don’t want to be chained to it all my life, so I choose to save and invest most of our money to eventually exchange it for financial independence. Being financially independent allows you to spend ALL of your time, not just weekends and holidays, doing whatever you choose. Traveling, spending time with family, working, starting your own business, etc. Whatever it is, it is YOUR CHOICE. And that is what it’s all about: freedom and happiness.
The Big Picture
As great as post financial independence life sounds, we should not fail to appreciate how good life is right now. I am healthy, have an amazing wife and daughter, a loving family, and wonderful friends. On the material, less important world, things are going pretty good as well. I have everything I need and then some. I am not telling you all of this to brag or to make you jealous. On the contrary, I am doing it to help you realize how fortunate you are as well. Chances are you have people around you who care about you, and if you can afford an internet connection to be reading this, you are already better off than 60% of your fellow human beings.
Taking it a step further, if you happen to belong to the middle class of a rich country, YOU ARE RICH! Believe me, I grew up in the Colombian middle class, and even we were rich. We had family, friends, abundant and delicious food, a lovely home, and could even treat ourselves to travel and other non-essential stuff. That’s all you need to be happy! Don’t let the marketing machine and The Joneses convince you otherwise. Appreciate and be grateful for everything you have. While you are at it, ask yourself whether you want to spend most of your life at work. If the answer is no, the financial independence community has a wealth of information to help you escape. Check out our new resources page to start exploring!
I agree with you 100%. In most Western countries we have it made. What it takes to cover the necessities is tiny, all the rest is fun money. A small amount of saving can throw off enough to live a lifetime. It takes about 10 years for most people (if they are serious savers) to get to retirement. Then you really discover if it is not about the money. Then you do what you really love.
Thank you the comment, Keith. Absolutely, I remember a Warren Buffett interview where he said that today, in many ways, the middle class in the U.S. lives better than John D. Rockefeller did. On the flip side, as a social species we also care about relative wealth, and I think this is where most people fall into the lifestyle inflation trap.
Great points! Sometimes we can get so caught up on the destination that we forget that the trip is where all the memories are made. Great blog by the way- I look forward to following your journey.
Thanks man! Appreciate the kind words. Great name BTW 🙂
Good post! What are you doing to try to save to get to your 25X point?
Thank you!
Some of the major things include:
1. Driving used reliable cars not bought on credit. I have a post on that: https://financeclever.com/carspart1howwesaved/
2. Living in a reasonably sized house that is within biking distance to work. More on that in an upcoming post.
3. In general, being thoughtful about spending money. This post shows all my expenses for a full year: https://financeclever.com/tracking-expenses-lessons-learned-2015/
Feel free to check it out and ask any questions 🙂
It’s not about the money–it’s about the freedom to do whatever you want with ALL your time, not just weekends and holidays.
Brilliant! I can see that you ‘get it’–keep sharing that wisdom 🙂
Thank you, Froogal Stoodent! 🙂
I am also a Colombian and just found your blog, I grew up in a middle low class in Bogota. I saved almost my whole first year salary as an Engineer and work for a few months in USA to have enough money to pursue my Master’s degree in Canada with no loans.
Also working towards FI, almost there actually after I checked the numbers. I am a big saver but I have made a lot of financial mistakes due to ignorance, now I am getting educated. I will follow your blog for tips and get myself more educated.
Thanks for stopping by Indira! Always great to hear from a fellow Colombian.
Sounds like you have done very well, congrats on being so close to FI! I have made my fair share of mistakes as well. I think it is inevitable to make some mistakes along the way unless you are exposed to FI from a very early age, which is not the case for most of us. But as long as we keep learning and growing we can overcome those mistakes 🙂
Great post! You are right on.
Thanks Heather!