In order to increase your savings you have to:. This means that you need to focus on lowering your expenses. And the lower your expenses, the less you need to become financially independent. Your savings rate is defined as the amount of money you save as a percentage of your income. You can calculate your savings rate by dividing the total amount of money you saved last year by your annual income. You can lower your expenses by first tracking your monthly spending and then creating a budget to help lower your expenses and stay on track.
Particularly consumer and student loan debts that have higher interest rates. The faster you can pay these off, the faster you can save and invest to increase your net worth and passive income. The amount you need will vary by your personal comfort level. Somewhere between months is typical. This way you can put your money to work for you.
There are many forms of investing and you get to choose the method that works best for you. I prefer investing in my own business and real estate, as well as low cost index funds with Vanguard. An important part of this whole process is to define your future goals and the life you want.
Then you can establish a plan to get there. Financial independence has the power to free up your life so you can fill it with what is meaningful and important to you and your family.
The gains are priceless: Freedom and independence. Happiness and fulfillment. Your email address will not be published. Join the Stepping Stones to FI tribe for weekly goal setting and financial independence tips.
Plus, download the workbooks and worksheets you need for your personal FI journey! This post may contain affiliate links, which means that if you make a purchase through a link, I may receive a small commission at no extra cost to you.
Earnings are used to keep this website running. Please read my disclaimer page for more information. I only ever include resources that I personally use and love. Contents and Quick Links 1 Why financial independence is important 2 Financial independence and happiness 3 How to achieve financial independence 4 Recap 5 Action Steps. Visit the Resource Library for a free workbook and worksheet to get started.
Again, you will find the resources you need in the Resource Library and from this post on creating a budget. Work on paying off any debt you have. You can create your debt payoff plan here and find more tools in the Resource Library.
Find ways to increase your savings rate. You can find more detailed help on how to calculate your savings rate here. Start saving to build up your emergency fund. Once you have enough in your emergency fund, start saving to invest.
Learn about my favorite method of investing and how you can get started with very little money here. Further, after 12 years of operation, Financial Samurai has turned into a steady income source that cannot be shut down. I realize today that money will always be somewhat of a concern, even if you are financially independent. The more people who depend on you, the more you will feel the pressure to provide.
However, the concern tends to fade into the background so you can focus on more important things like your friends and family. You also need to have a purpose as well, or else you may get depressed. Money is only a means to help facilitate these goals. Sacrificing and hustling when you still have the energy is worth it. Waking up a couple hours earlier to work on a new income source is privilege. Adopting an abundance mindset will make you richer than if you adopt a welfare mindset.
If you are torn between being an optimist or a pessimist, choose optimism! Control what you can control in order to get what you want. Once of the things that will help you during times of chaos is accurately forecasting your passive income streams. If you do, you will have less fear and more confidence navigating the storms.
Here is my latest passive income estimates if you are interested. To provide some motivation during this uncertain time, here are some reasons why you should strive for financial independence. You know the people who are always late because they are selfish with their time? They used to bug me to no end. I could go on and on about such people in the work place and online. Or how about people who only contact you when they need something? Seriously, bug off! All these people use to piss me off, but now they hardly ever bother me anymore.
I just stop associating with them, because I no longer care about lost potential opportunity. How crazy is that? Meanwhile, you witness all the government waste. The return on your taxes increases. I have friends who play tennis everyday and kick back thanks to the government.
Heck, I appreciate the government so much that I plan to re-retire within the next 12 months! With such a massive safety net and higher taxes, I no longer have the motivation to keep grinding away. Stress kills. During my most stressful working days I developed chronic back pain, tendonitis in my elbow, and TMJ jaw clenching, teeth grinding.
My chronic back pain has long been cured since reading Dr. Our health is priceless. We need to remind ourselves how important our health is when we are healthy. A little bit of paranoia is good for everyone. Finance is a very cyclical and cutthroat business. Part of the reason why I wrote How To Engineer Your Layoff was to empower people to take control of their own destiny.
To be able to leave on your own terms is incredibly empowering. We call these things passion projects and not a job for a reason. Financial Samurai has been my passion project since I treated this site as a hobby for so many years. I wrote carefree, barely focusing on monetization because I either had a job or had enough passive income.
Enjoying the process is the key reason why this site grew. Whatever the case may be, it feels great doing what you love. The money becomes just a nice byproduct. Imagine not feeling the need to respond to every e-mail or request. Feeling OK with 20, unread e-mails is wonderful. Imagine not having to pretend you like someone just because they hold the keys to your future.
Failure is scary because it is embarrassing. Sometimes, failure can be disastrous financially. However, if you have the financial means to withstand failure, then you become less afraid to take risks.
Think about billionaires like Bill Gates or Evan Spiegel. Because they were born rich, they could afford to experiment with entrepreneurship. Eventually, you get to the point where you start succeeding because success is partly a numbers game. You can afford to fail. When you can afford to fail, you will feel more free. To create something on your own feels much more rewarding than creating something for someone else.
How many times have you bit your tongue because you were worried about the consequences? If your finances are secure, you no longer have to put up with verbal abuse or harassment in the workplace. When you are financially independent, you are more confident to speak your mind when you see an injustice. One time, a tennis opponent quit his match after being down , , all because of a close baseline call I had made.
It was clearly out, but he disagreed. He started cussing at me so I walked right up to his face. I told him not only was he a sore loser, he best apologize for swearing at me. He was in shock at the confrontation, probably because nobody had ever stood up to him before.
Immediately, he apologized and said he was out of line. He realized he could not afford to damage his reputation because he was a professional tennis teacher. Tennis was just my hobby, but to him, tennis was his livelihood. Online, you see mobs form all the time because individuals are too afraid to stand up for themselves.
For the sake of mob protection, individuals will give up their beliefs. To be able to never have to back down from anyone is a wonderful feeling. So is being able to live your truth. One of the best reasons to strive for financial independence is because it enables you to care less about what people think. Caring less about what people think is hard. We always want the approval and admiration of others.
Why else do some people try so hard to seek status? In the past, I always used criticism to try harder. Today, I approach criticism with more of a ho hum attitude. It feels liberating to have insults and insinuations roll off your back.
Not only will you care less about what other people think, you may find ways to benefit from your critics.
As a result, I decided to share a humorous story about a particular incident. Now the article is one of the top searched posts on Google. So fun! Between — , I consulted with several financial technology companies and learned so much about Silicon Valley startup culture.
I even consulted for a Y-combinator series seed company with only six employees. Even though the company failed, it was a great experience. We ended up winning the Northern Conference Championship twice. We were excited to try and three-peat in until the pandemic shut us down. Our parents tend to give us everything and ask for very little in return. They hope we can simply lead happy, self-sustainable lives. When we are financially independent, our parents worry less about us.
We start spending more time with our parents too because we have more time. Every one of us have some desire to make our parents proud at some level. See: Solving The Happiness Conundrum. The sooner you become financially independent, the sooner you can spend more time with your children.
Children grow up quickly. It is very rewarding to teach children new things and witness important milestones. When our children become adults, we will reminisce about the time we spent with them. We might even regret not spending more time with them if we worked too much.
My wife and I had children late, which is one of the downsides of trying to achieve financial independence at a younger age. If you know you want children, I say have children sooner, rather than later. The sooner you have children, the longer you will have each other in your lives.
This fact trumps all other arguments for when to have children because you will love your children more than anything. Hard work is awesome because the benefits last long after the hard work is done. The people who are trying to put you down are too lazy to try themselves.
More than eight years after leaving work behind, the value I place on financial independence has only increased. Whatever wealth we have is mostly due to luck.
To not recognize our luck would be disingenuous. As a lucky guy, I plan to use my good fortune to lead the life I want to live. Hopefully, I can help many people get luckier too with this site. Life is on hard mode now. Sooner or later, life will get back to normal. And when it does, we will cherish our freedom greater than ever before! In addition to better money oversight, run your investments through their award-winning Investment Checkup tool.
I will show you exactly how much you are paying in fees. After you link all your accounts, use their Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible.
When you are financially independent, the last thing you want to do is go in reverse. Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income.
Stocks are fine, but stock yields are low and stocks are much more volatile. However, real estate held steady and appreciated in value then. The key to financial independence is having enough passive income to covered your desired living expenses. Take a look at my two favorite real estate crowdfunding platforms that are free to sign up and explore:. Fundrise : A way for accredited and non-accredited investors to diversify into real estate through private eFunds.
Fundrise has been around since and has consistently generated steady returns, no matter what the stock market is doing. CrowdStreet : A way for accredited investors to invest in individual real estate opportunities mostly in hour cities. Readers, how is your path to financial independence going? Do you feel the journey is ever over?
If you have financial independence, how does it feel? This money did nothing to combat the actual virus. One only needs to look at China, Taiwan, Australia, New Zealand, and others in Asia to realize how the virus could have been contained. Even the new president who campaigned as being the better candidate to tackle covid, admitted that there was no way to change the trajectory of the pandemic.
The government absolutely wasted 3 trillion dollars and is in the process of wasting yet another 1. The latest bill is even worse as it includes numerous programs that have absolutely nothing to do with combatting covid.
As an American I am ashamed of how the country has responded and continues to respond during this pandemic. It is brutally difficult, if not impossible to raise children and work at the same time for during a pandemic. There are no easy perfectly efficient solutions to combatting the virus, poverty, and other issues. What would be your alternative solution? And can you tell me more about your background so I understand where you are coming from? I could easily afford either home but the stingy in me keeps trying to keep me from buying either.
Any thoughts on how to start spending? I should add that I am retired and 60 years old with a decent pension and savings. My father was always cheap as well and my brother and I were raised that way so it is difficult to justify spending even a dollar or two. I do spend money on travel and within the past few years, have started to stay in much nicer places.
We just got back from a km driving road trip to southern Mexico. Contrary to what you read in the news, there are very few people traveling within Mexico — nearly all are going to the famous beach resorts like Cancun and Cabo. We often had hotels to ourselves in some beautiful locations. What is truly bothering you to make you not want to do everything possible to help other people during this difficult time? I am ashamed at the response to the pandemic.
Trillions of dollars were spent but with little assistance provided directly to the working and poor families. Basic healthcare was never included in any of these relief bills.
That alone would have alleviated much of worry that many families have had during this pandemic. A much better solution would have been to provide universal income to those same families and truly close the economy for a few months much like the Chinese did in Wuhan. Yes, it may have been draconian but it worked. Life there has returned nearly to normal and the economy is booming once again. Why is it the US has refused to follow the lead of those nations that have successfully combated the virus?
How many of those half a million Americans that have perished would be alive today if they had? I am retired Foreign Service Officer like your parents. I live in Mexico and I have seen the pandemic from a different perspective.
Here the government provided little economic assistance. When the pandemic first hit, we moved to a nice home 25 kms from the city in a rural area for fear that crime would explode in the lower middle class neighborhood where we reside. Surprisingly crime has not risen very much; people help each other and know that they cannot count on the government. Recently started reading your stuff and love it. When you started the blog in how did you do it?
I read the Internet Retirement Police article linked to this one and I got angry that you would get such awful comments for writing great articles, I thought I should show some love, thanks for helping us become smarter and wealthier, keep up the great work! I think you and I would be friends.
You try as hard as I do. Everyone including Warren says this is the way to go. I read 4 hours a day about the markets. I enjoy it. Everyone I ask has Netflix. No one talks about Apple Plus.
In my opinion, 50 years from now there will only be EV made by Tesla. Amazon owns the world. It seems most people are walking with white sticks in their ears. For me, everyday is not like Christmas. Relative to my wealth, I also continue to be stressed out by small problems e. All of us should work on not letting the small things bother us regardless of our wealth. Over the years, I have tried to approach life with greater calm. By not being burdened with a full-time job, I have greater clarity of thought and time to face the other challenges in life.
The money helps, but I think part of it is just getting older and hopefully wiser. The only part that is like Christmas are the moments when I remember I avoided 25 more years of sitting in an office, cubicle, meeting, commute, etc. I fell into my interest of finances largely by accident. I built a spreadsheet to track the payoff of a vehicle and how extra principal payments would affect the total interest, term, etc. Kinda nerdy, I know.
That was about 3 years ago. Never really had substantial savings, pretty regularly had a car payment, etc. Luckily I did get rid of my student loans, and had always been responsible with not building up consumer debt. Now I must chip away much slower, a brisk jog at best. But admittedly I should still be FI far before the average person. Because I am dedicated to it.
I set goals. I track progress. I want to be FI. I went from saving I say all that, as hopefully some motivation for others. Either at my age, older, or hopefully some young whippersnapper out of school may see this and get that early head start, and sprints for awhile before they have to jog…. With kids, the energy to side hustle and do more work absolutely gets zapped. Ideally, folks have a solid financial foundation first, before having kids.
Otherwise, the stress might destroy a marriage. But I think you are very fortunate to have kids at 29 and 31! They are the biggest blessing and worth any financial sacrifice. Nor did I ever return to a full time job. The only thing I would suggest is to not fear debt. Many finance gurus preach paying off all that debt as quickly as possible but not all debt is created equal.
Whether that number is actually 2, 3, 4 or 5, you should think twice about paying that debt off early. I highly recommend maxing out your low interest, tax deductible home loan for as long as you can while you are in your wealth building years.
Much of my wealth has been built by real estate. I was a Director one up from VP in banking when I left in Finance was the best industry to make money in the s and early s. Then big tech really took over. That is the dream for a lot of SWE. Hi Sam! Long time reader. I was recently laid off last week and it was hard to read personal finance content when I have no income coming in as of now.
This was exactly the post I needed to stay motivated and strong. Thank you. It is such tough times now.
I hope you at least got a severance and get some enhanced unemployment benefits. Hopefully, I can hit FI over the next two to three years. I cared some about money in my early 20s and then a good deal more in my late 20s. Then, I cared a lot about money in my 30s and really stepped up my hustle. I need to remind myself of the feelings I had in my late 20s and 30s to appreciate my financial independence more.
Great post and loved reading the updates. Thanks for inspiring us for so many years with so much financial knowledge and wisdom! Without purpose its just penny hoarding. Good luck! When you wrote this in retirement was far from my mind. Now I have a date set for While I do not have multiple income streams, I saved enough and diversified enough to not worry. I will not need social security distributions either. Much appreciate this article. I associate with people of a certain view that government is in their way.
Well government will not be in my way when I no longer have the W2. Yes, I could appreciate the libraries, fire departments, road repair crews, and what not. But thirty six years of paying for all that is enough for me.
I diversified among tax avoidance strategies and might even afford to stay in a nice part of California without feeding much to the beast. And there are still nice areas. There is political freedom and there is financial freedom. The sad cruel fact is that if you have enough money the state thugs will ignore you. Sad and cruel for those struggling. Your statement of willing to go to war over being mistreated is admirable in theory, but sounds dumb in practice.
You can get shot if you decide to go to war with the wrong people. Were you bullied while growing up? Or maybe you never grew up around rough neighborhoods where violence is a daily part of life.
0コメント