Today is International Financial Independence (FI) Awareness Day, a day to raise awareness of the concept of financial independence and some of the principles that fuel it. It’s being held on April 25 (04/25) to highlight a key principle: if you want to live entirely off your savings, you should plan to have about 25 times your annual expenses saved, since 4% is deemed to be the safe average annual draw-down rate for a reasonably-invested person. (More information can be found here.)
This is an excellent rule of thumb and a great target for anyone who has it as their goal to fully retire well before pensions will start paying a regular income stream. But it’s really focused on just one vision of what financial independence is. I believe that what is more important is to sit down and really focus on what it would mean to you, individually, to feel like you have real freedom in your life. And that will mean different things to different people.
For some, that will mean starting an extreme saving and investing strategy early and moving to a life of leisure in their 30’s. For others, it may mean adjusting their lifestyle so they can work part time and pursue other things that have deep personal meaning such as art, volunteering or family care activities. The key is to think deeply about what is most important to you and orient your life in that direction, using financial independence and good financial management practices as the tools to make it happen.
My Own Experience – Late To Start, But On My Way
In my own case, a couple of years ago I realized I had to make some changes. Deeply in debt, working long hours in a job I had slowly grown to hate, I was stressed out and deeply unhappy. I recognized I had become so focused on the problems I was having that I had completely abandoned some of the things that were really important to me. I just didn’t feel like I had the energy or interest in engaging anymore. I knew something had to change, but I felt trapped.
That feeling of being trapped is the worst thing you can do to yourself. And the pain is self-inflicted. When you carry too much debt, spend too much money on things that don’t matter and aren’t holding yourself accountable for your finances, it can seem impossible to break out of even the worst of circumstances. And it sucks.
So for my wife and I, the first step to seeking financial independence was to get out of the mess we were in. We sold our properties, which for a number of reasons did not generate any significant revenue for us, and started renting. We got serious about cutting expenses; moving into a small apartment on a transit line, going from two cars to one and cutting out any spending that we felt did not bring us real value (dining out was a big one). Soon enough, we had saved a decent-sized emergency fund and made real progress on our debt.
At that point, a career change didn’t seem so daunting. In fact, it seemed downright straightforward. So I simply quit what I was doing, took a break for a couple of months while I explored the possibilities that were out there, and then got back to work at something completely different that I really enjoy. It has changed my life significantly. I am back pursuing activities outside of work that make me happy and re-engaging with my life again.
And this has taught me a real lesson. Financial independence and sound financial management aren’t really about getting rich as an end in itself. It’s about having the room and capacity to live life on your own terms, so you aren’t looking back years later with nothing but regret. I am in my 40’s now, and I wish I had woken up to the importance of pursuing financial independence so much earlier. However, the best time to get smart and take action is now, and that’s what I am doing.
My next goal is also very modest. I want to get to the point where my wife and I can both live off part-time work. Not that I will make the switch right away, in fact I have no intention to. But I want to be secure in the knowledge that I can. It won’t take much to get there, and based on my current progress, I should hit the sweet spot in just a couple of years.
In the meantime, achieving my personal vision of FI doesn’t mean living like a monk today. My wife and I are leaving soon for a 17-day trip to Central Europe. We’ll be taking first-class rail between destinations and staying in four-star hotels. And we saved the whole amount, in cash, to pay for it. Since travel is one of the highest-value things my wife and I do, we have no trouble allocating the cash for it, especially now that we have consciously cut out most of the unnecessary, low value spending we had engaged in for years.
So on this, the first-ever International Financial Independence Awareness Day, here is my recommendation for everyone, younger or older:
1) sit down and write out what is really important to you and what you want your future to look like.
2) get your financial literacy on by following some of the excellent FI bloggers and commentators out there. Find someone whose outlook is similar to yours that you can learn from.
3) take the necessary steps to stop being foolish with your money, align your spending tightly to your goals and values, and set yourself on the path to freedom!
Important Disclaimer: the information above is for general informational purposes only and does not in any way constitute an offer for the purchase or sale of any security and is not intended to be considered comprehensive or personalized financial or investment advice. themoneygeek.info assumes no responsibility for the use or application of this information. Always consult a tax, investment, or other appropriate professional before adopting any new financial strategies.
I am an accredited Financial Planner with 23 years of experience in the financial services industry. During the course of my career I completed hundreds of financial plans and recommended and sold hundreds of millions of dollars of investment products. I believe that financial independence is a goal anyone can aspire to and I am passionate about helping others to live life on their own terms.