My Definition Of Financial Independence Is Different Than Yours

FI means different things to different people:

Some seek to be financially independent so that they don’t have to work any longer at a job.
Others may want to be financially independent in order to pursue a passion.
Another may want to travel as much as possible.
Some want to afford a very rich lifestyle without having to work at all.
And some want to build a conservative baseline income and go all out and really take some risks.

The average American that retires at age 65 is seeking financial independence too. It’s no different; I am just wanting to do it at a younger age. I get asked a lot “Why do you want to stop working so early?” I would wonder why someone would want to work for so many years.

The traditional retiree will work at a job often trying to obtain a pension, build up their 401(k) and their savings, pay off a mortgage in hope of being able to spend the rest of their life not having to work and live off their savings.

Delayed Gratification

This is sort of the inevitable when it comes to accumulating wealth. No matter which category of the above you belong to one must sacrifice a few years of hard work, good saving strategy and wise investing. I am not one to throw out savings-percentages. You should save 20% or 50%… it doesn’t make sense. You should maximize your savings. Period.

You can maximize savings by paying down a high interest student loan. That’s what I’ve been doing for the past 7 months, so my savings rate is around 21%.

But, saving is key and I would say the most critical part of achieving FI. Saving isn’t about making sure that whatever money you have left over you just put in a savings account. It’s about cutting out as many unnecessary expenses as possible so that you have disposable income to save.

You can still live a very comfortable and life of joy with a small apartment, no car (or a cheap used car), cheap hobbies and a sensible entertainment budget. I think it’s very doable for a single physician to spend less than $3,000/mo on living expenses.

What Number To Aim For (~$1,800/mo)

I am aiming for enough to cover my minimum expenses to afford me quality of life. My quality of life is having a safe and comfortable place to live, food and healthcare. I don’t factor in transportation and entertainment because those I can have for nearly free. I don’t care to have a cell phone, or I should say that I don’t find it necessary. In the near future I suspect internet access will be free in many major cities so I don’t need to budget for that.

Here are some actual numbers, in today’s dollars:

$1,000 a month is more than enough for housing.
$300 for food/groceries.
I need somewhere around $400 for health insurance. And I would say another $100 per month for random shit that I will need. So that’s a total of $1,800/mo that I need to live a comfortable life or $21,600/yr.

How To Passively Make $21,600/yr

I anticipate being able to retire in the next 3-4 years when I will be in my early 40’s so I would need to plan for 50 years of income. If I have a savings account with $1,080,000 that can keep up with inflation then I can just take out about $22k every year and be broke the day I die.

I’ve talked about other ways of investing one’s money which could produce passive income. Stocks/Bonds are one option. Investing in real estate can create income as well but I don’t consider that passive income, it’s more like a side business.

With the current status of wall street I could invest somewhere in the $600k range and expect to make that $21,600/yr. I am aiming for a little above that just to give myself some wiggle room.

Ways Of Living A Financially Independent Lifestyle

So, let’s say it’s 2019 and I’m 41 and retired … awesome! I’m either living in my recently purchased condo or I’m renting somewhere in another country. I can expect that my investments will net me around $1,800/mo if I invested properly and saved adequately.

I may want to live a little larger, take some trips, vacation around or buy some nice stuff. OK, well in all honesty I don’t have a desire for most of that stuff but… let’s say I do. In that case it wouldn’t be hard for me to do a little on the side to create the extra income.

If I am living in the States then I can pick up a few urgent care shifts every couple of months. If I’m living in another country I could teach English, write fora local paper, or do some sort of work that could create income.

Again, I am financially independent. I’m not swimming in money but I can always cover my overhead and live a comfortable life. And for the times that I just want a little more, I have the option of making extra money.

Don’t Feel Like You Are Missing Out

Some of my friends look at my life and worry that I might be missing out on something. If you feel that way there will either have high dissatisfaction leading to ultimate failure or a high degree of resentment during your accumulation phase.

Instead learn about what makes life truly worth living. I mean if it’s puppies and shit then surround yourself with that. If you like helping people then go volunteer. If you like traveling then spend 3 months every year living somewhere else by renting out your place so that the cost isn’t prohibitive.

From 2009-2012 the only way I thought I could have fun is by spending a lot of money on clothes, cars, travel and housing. I did that and still found myself only chasing the next happiness. From 2013-2015 (now) I have found my happiness is reading books, sitting at coffee shops and exercising. This new lifestyle has been more pleasant and more sustainable.