Picture This Sunday Evening...
It's 6 PM. Tomorrow is Monday. That familiar knot forms in your stomach. You might hate your job. You might love parts of your job, but you can't shake the feeling that your time isn't truly yours. You're trading the best hours of your life for a paycheck.
And the reality is that you are. You are forced to trade your time for money to pay those bills.
What if you could change that? What if work became optional?
What is Financial Independence?
Financial Independence means you have accumulated enough assets that you don't need to work to pay your bills.
You might still choose to work. But you're doing it because you want to, not because you have to.
How is this even possible?
Right now, you work for money. But money can also work for you.
When you own stocks, you own tiny pieces of companies. When those companies make money, they share some of it with you. When the companies become more valuable, your stocks become more valuable too.
If you own enough stocks, the money they generate can pay for your life. That's financial independence.
How Much Money Do You Need?
Start with this question: How much money do you want to spend each year when you're financially independent?
Maybe $40,000. Maybe $80,000. Maybe $50,000. Pick a number that feels right for the life you want.
Now here's the key insight: You need about 25 times that annual amount saved up.
Money Needed = Annual Expenses × 25
Want to spend $40,000/year? Need $1,000,000 saved
Want to spend $60,000/year? Need $1,500,000 saved
Want to spend $80,000/year? Need $2,000,000 saved
We'll dive deeper into the math in future articles. For now, just know that 25 times your annual expenses is the proven target for financial independence.
How Do You Build That Much Money?
That number might seem huge but it is more achievable than you think. At the absolute simplest level there are three parts to the recipe:
- Avoid debt
- Spend less than you earn (also called your savings rate)
- Invest the difference
When you do this it can gather pace pretty quickly and you will be surprised at how fast you can build towards your goal.
Navigating the Journey to FI
We have made it sound incredibly simple and easy thus far. Unfortunately, navigating everything is complex.
A dizzying set of different account types (taxable brokerage, 401k, IRA, Roth, HSA, 529 plans, etc.), investment strategies (index funds, ETFs, bonds, etc.), taxes, inflation, fees, balancing FI with other life goals (college, travel, etc), financial concepts (compound interest, present value, diversification)....
The whole point of FI is to get your time back, not to get a phD in finance and accounting.
This is why we built MoneyOnFIRE. Our goal is to simplify everything and to give
- Fastest Path: To ensure you are not wasting thousands of dollars (or years of your life)
- Tailored to You: Understands your personal circumstances
- Clear and Actionable: Actions you can execute yourself
In the coming articles, we'll guide you through everything you need to know step by step.
Each article will build on the last, giving you a comprehensive roadmap to financial independence.