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My Definition Of Financial Independence Is Evolving

How I Define Financial Independence After 4 Years of Chasing It

As my writing is evolving so is my knowledge as I read more books, write more posts and talk to more people. During this process I’m learning that my original definition of financial independence is changing, for the better.

In the most recent post on defining the term ‘financial independence’ I came up with a savings number to aim for, I used the 4%-rule and talked about cutting expenses as much as possible in order to maximize savings.

I wrote that particular post November of 2015, about one year ago. It’s really cute looking back at it. The information in that post is still correct and it’s a very traditional way of looking at becoming financially independent. It is a narrow view, however. This makes it applicable to our financial markets now but it may not be viable in a decade because it’s not a concept, it’s a set of interdependent steps.

Bird’s Eye View Of Financial Independence

Quite a few Americans don’t end up having enough money for retirement which means they have to work in retirement. 45% of Americans age 55+ have less than $100k saved up for retirement. Granted, the average professional isn’t the average American but professionals unfortunately have a similar financial literacy as the average American – which isn’t much.

From this wider perspective financial independence means that we no longer need to rely solely on our jobs to generate income to live off of. At this level it has nothing to do with passive income, it has nothing to do with lowering your expenses or increasing your savings. It’s not about building up a pension or optimizing an index-investing strategy.

Your financial adviser should be investigating your personal definition of financial independence regardless of your age. The overall picture shares a common theme, but each person has different priorities in life and priorities change as we change.

  • Does it mean you work less?
  • Does it mean you have more control over your free time?
  • Does it mean you get to do exactly the kind of work you want?
  • Does it mean that you simply feel secure without making any changes to your work-routine?
  • Does it mean you can change your career?
  • Does it mean you can travel more or spend more time with your family?


A Universal Definition Of Being Financially Independent

Regardless of who defines FI and how they define it, at its core lies the feeling of security, independence and freedom.

I don’t personally know of any doctors who are able to do whatever they want with their time mostly because the majority of our times needs to be dedicated to our work.

The need for the job stems from wanting a steady income and mental stimulation and having a sense of accomplishment, contributing to society and fulfilling a basic need as a human to help others.

The Really Big Picture

I’m gonna break my ideas up into the really-big-picture view, the big-picture picture and the close-up. Not very creative, I know, bear with it.

From far, far away a person is financially independent when income is being generated without much effort on their part. It’s basically like having to press a button on the water dispenser to get water. You no longer have to haul the water from the river to your house to be able to have immediate and convenient access to it.

This can be accomplished safely only through diversification. One has to understand the different facets of the financial system in the country they live in and dabble in the majority of such systems.

For the foreseeable future in the US a professional should have some exposure to real estate, a secure living situation, investments (stocks, bonds etc), a business and secondary or tertiary work skills especially if they are highly specialized in their profession.

The Big Picture

This is getting the water into the tank of the water dispenser. The goal always is to only have to press a button. Sure, your ass could get so rich that someone can pour the water in your mouth but that takes a lot more effort than I’m willing to put in.

The big picture needs your attention in the following categories:

  • gaining exposure in real estate
  • putting some money into financial investments
  • building up a small business
  • learning new money-making skills


Real Estate

I don’t think it’s absolutely necessary to own your primary residence but if you do be sure that it’s something affordable and easy to maintain. The goal is to pay it off as soon as possible and maintain it so that it doesn’t fall apart on you and cost you much more to fix later.

Keeping the cost low on your primary residence has the added benefit of it being easier to rent down the road and having less property taxes associated with it. Though most likely a physician will retire with enough money to afford the upkeep of a home it’s always better to minimize one’s financial obligations in the future.

Outside of your primary residence consider investing in real estate. I don’t consider your own home an investment which I’ve talked about in the past. Sure, there are exceptions such as those who own a duplex or those with accessory dwelling units (in-law suites) but otherwise your home is often a liability, not an asset.

You can invest in real estate through many forms. I’ve talked about REITs, rental units, flipping homes, real estate syndications, and you can leverage your own home by renting out a room.


This can be securities such as stocks or bonds through options trading, mutual funds or robo-investing. It’s something you would have to research, talk to your financial adviser about and see what feels right for you.

Peer-to-peer lending is a form of an investment. Some deem it too risky due to risk of defaults which is a valid concern. So far these companies have done well and only time will tell how they will perform in the future.

Angel investing and investing in foreign countries is becoming another popular way of making your money grow. However, these are riskier and though you could take 5% of your entire portfolio and invest it in such ventures it’s not easy. I would recommend getting a mentor and learning from them. Browse the bogleheads forums and I’m sure you can find someone who dabbles in that stuff.

Building A Small Business

Brick and mortar businesses are no longer the main money makers. Sure, you could open a medical supply office or a pizza shop but you could just as well sell children’s clothes online or export a product to another country that you know you can market effectively.

I sold a car to a guy once and asked him what he did and he said he rents a small industrial warehouse and order a car part in mass quantities, assembles it and sells it locally to the stores, makes a very good living doing it.

I have friends/acquaintances who have their own medical offices, dental offices, who redesign products and sell them, who own fast-food restaurants, who own high-end bars, who have consulting companies, who make money through their blog, who sell products for parenting online and who have med-spa’s.

A business starts because of your desire to make money outside of your job, without oversight from someone else. It is fueled by your desire to improve a service or provide a whole new one. It will succeed when you put adequate up-front work into it and learn from the mistakes you make. Once successful a business needs an ongoing amount of effort which should decrease as the business grows.

Learning New Skills

This is the last category in our big picture view of financial independence. And the premise here is that if your skills are limited to your PhD or PharmD or MD/DO degree then you are out of luck if you lose your job or burn out from it.

The point of learning another skill is to diversify and give us a feeling of security. What’s the chance that you won’t be able to continue practicing your profession? Incredibly low. The most likely cause is disability which is almost always temporary and hopefully you are covered by disability insurance.

Most people don’t believe their hobbies or interests can be developed into a skill and I would like to dispel that notion. I loved working on cars and that’s a great skill that I’ll always have. I am not artistic but I know how to weld. I can fix things around a house and I can play quite a few sports. I understand nutrition and I try to learn everything I can about writing, blogging and online marketing.

  • If you like arts maybe you can have an art gallery.
  • If you like traveling maybe you might like running a website regarding your travels and sell advertising on it.
  • If you like health/exercise you could become a health coach or create a series of videos to sell online regarding this topic, especially if you have a unique spin on it or have a niche population you want to advertise to.
  • You may love your medical career but hate the equipment available to you, you could work with product designers online to tweak them and market that product through already-existing medical supply companies.
  • If you have kids and don’t see a certain clothing type readily available you could open an e-commerce store and sell only that product.

The point is to start doing something on the side now that may never generate income for you or perhaps generate very little. But in time this will not just be a hobby but a skill.

The Up-Close Picture

We’re almost done, this last part is really just talking about expenses and income. You can’t go buy a $300k real estate investment if you are dipping into your savings just to pay your annual real estate taxes or if you can’t set aside a couple thousand dollars every month.

The income side for doctors is usually fairly optimized. If you make $200k and work your ass off just to get to $300k I assure you that you won’t feel a whole lot of difference. Your spending usually will go up accordingly because of the lack of free time you’ll have working those extra hours.

Some of you who read this website make $100k a year and I have heard from some of you who are making close to $1 million. I am not outing anyone but for the most part those of you making the higher salaries live in nicer neighborhoods, have nicer cars, bigger homes and are helping your family out with more money. On the surface you aren’t living a far better life than the few people on here who make $100k.

Let’s focus on the expenses instead. This is the lowest hanging fruit. You want to be a better surfer then practice paddling, it’s the biggest bang for you buck. It’s not the surfboard or the wetsuit or the right wave on the right beach that will make you better.

If you cannot control your expenses then you won’t have disposable income. I recommend budgeting, I’ve talked about YNAB many times and still thing it’s one of the most important things to learn in order to reach your financial goals.

  • Build up around $50k in cash reserves and put it in a savings account. Use it only for emergencies or dip into part of it if a great business opportunity comes up.
  • Start investing in mutual funds. Your goal is to get to around $100k. Learn as much as you can about mutual funds, they are easy, it won’t take you long.
  • Once you reach $100k you can start investing 5% of your portfolio in individual stocks or whatever riskier asset class you are interesting in (if you want). Learn options trading or dividend investing; but never with more than 5%.
  • Then start attacking your debt, I am mostly talking about student loans. The mortgage on your primary residence is a secured debt, it shouldn’t be an immediate goal to pay that off. Often investing early is better than paying off mortgage debt.
  • Start investing in yourself, take courses online or in-person. Learn writing, investing, real estate, teaching, computer programming, painting or whatever else you like.
  • Try as many things as you can and find something that resonates with you and start writing about it, maybe using a blog. Then see how you can make some money through your hobby/passion.
  • Keep investing in your mutual funds but start looking for a way to get access to real estate investing as well. Buy a nearby home in your neighborhood that you know is a good investment, one that you can either flip or rent out to make money.


This isn’t a linear process, you will go back and forth. You may have to dip into you $50k at times for whatever life throws at you. But then you may have a windfall of cash come into your life, use that to get you closer in one of your other categories.

Start small, make a lot of small mistakes, it’s okay. The money you spend on that mistake is not money lost but money invested in learning.

This concludes my definition of financial independence. Come back in a year and it will change again. But what doesn’t change is that at its core


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