I’m working towards FI, otherwise known as financial independence. For most people achieving financial independence coincides with retirement or retiring early. To some, this is referred to as on the path to FIRE. I was listening to a ChooseFI podcast where the person being interviewed (can’t remember their name at the moment) referred to those who were on their way as FIRE walkers. Sounds like a pretty cool term, right. I’m a fire walker! Yeah, I like the sound of that, only I’m thinking of it a little differently.
Today I was on the Our Next Life blog and went back into the archives. It’s something I like to do to see how others started out with their first posts. Going through the site that way you can see their progress in chronological order as opposed to starting with where they are now. As I did this the second post that Tanya wrote was “what we mean by ‘retirement'”. I liked it. It helped define the path and some of the goals they had and what retiring early for them was going to be.
I thought it a fun exercise to do something similar here on YMIDoingThis. It will probably help me better define why I am doing this whole thing too! In my case, though I would like to talk a little about what I mean when I talk about achieving financial independence, mainly because at this point I’m not ready to retire. Sure there are lots of things I want to do and see, but there are also a lot of projects that can still be considered work, so when I hit my financial independence goals I probably won’t be retiring early. At least that’s my thinking today.
Defining Financial Independence
So what is financial independence? For most, it is the point when your investments can cover your living expenses for the rest of your life. I agree. Many people would describe the investments portion as stocks and bonds or securities. For others, it also includes real estate investments. I like both of those and hope to have plenty of each. I’d like to expand that in my point of view a little more too. For me, I’ll take into consideration any income-producing asset. In addition, my financial independence will include income made from assets like websites.
I’m working on a few right now. Some of you may argue that you can’t count on that so much, but I’m looking at it as if I were investing in a single stock. Sure you are diversified if you go the route of investing in an index fund that tracks the entire stock market, or some of the major indices like the S&P 500, but my personality likes taking on a little extra and although I have a major focus on putting a majority of my savings into broad market-based index funds, I will also buy a stock from time to time. Some times it works out, sometimes not, but I do it. It’s an asset that can increase in value and potentially provide income.
I’ve found that a website can be a similar asset. It’s something I can work on without putting a lot of money at risk and gives me something to do while I wait for that index fund to grow. Maybe along the way, I’ll learn how to create a profitable site as well. There are a number of online entrepreneurs who consider building out web properties as their job now, having ‘retired’ from the standard corporate world and transitioned to one where they are providing for themselves through their online ventures. I like that idea.
This concept of financial independence through investments and other income-producing assets for me includes anything I’m doing to cover my living expenses without the standard 9 to 5 job with a boss. So in addition to the sites I’m working on I’ll throw in my Amazon Arbitrage business as part of my financial independence. Right now it’s a side gig, but if I work it right it could be a full-time business.
What Financial Independence Means to Me
Financial independence for me is getting to the point that I could quit or lose my job and it would be ok because I have enough income coming in from other sources that it really doesn’t matter. I want to be to the point that I could go on living life as normal without worrying about it. I know that for many of the FIRE community achieving financial independence requires saving enough in your investment accounts to cover your lifestyle with a 4% drawdown (or less) from your investment accounts. That’s a great goal. I hope to get there and have my financial independence be 100% passive other than an occasional rebalance of the investment allocation. In the meantime, when I get to the point that my investments, using a 4% drawdown concept, along with the income from my other assets exceed my current living expenses, I will consider myself financially independent.
This may not happen as fast as I want it, especially as I’m starting this journey a little later than I really should have.
Oh yeah, and that’s not me in the picture, it was a free one from Pixabay, but I imagine that’s how I’ll feel when I reach FI!