What is Financial Independence?

So by now you have probably picked up what this blog is mostly about. And you’ve probably seen the words “Financial Independence” a lot. But what does that actually mean? Over the next few blog posts, I am hoping to break it down into clearer parts, but let’s just start with the overview.

Essentially Financial Independence is a keyword used around a movement. Some refer to it as the FI community, other as the FIRE (Financial Independence/Early Retirement) community, and I am sure that there are plenty of others. And while I could list of 20 blogs that I love reading and focus on this community, they all kind of find different niches to focus on. Whether they start out with that goal or whether their writings have just taken them there, over time you can pick up the differences in their writings. But what is cool is that there are some fundamental points and ideas that everyone in the FI community believe in. And when I say believe strongly in, I mean obsess about. I mean if we weren’t super passionate about the FI community, the life it can give you, and the many benefits that come from it, why would we all be spending so much time trying to spread the word!?
The FI community is also super different because it is NOT a gimmick. This is not a get rich quick scheme. The reasons that those sites and movements and ideas seem too good to be true is because they are. THIS IS NOT AN EASY THING. This type of lifestyle requires a ton of commitment and dedication, but it is completely worth it. Why? Well let’s take a step back and look at how FI turns the normal American Dream lifestyle and turns it upside down.

Ever since you were a little kid, the story has been the same. Go to school. Go to college. Get a degree. Get a job. Get a car. And a house. The biggest you can afford. Fill it with kids. Save 4-8% for retirement. Spend the rest of your money on toys. And boats. And RVs. And sports cars. And the latest technology. The finest clothing. The best furniture.
In summary, build a life that is so based on borrowed money that you have to have a job to live. Create an entire existence based on credit. Sometimes, like myself, you go into a crazy amount of debt to be able to get a job, to then pay back the loans on your school. And once that is done, you have to keep your job to pay for your house and your car, which you have so that you can be close to your job and drive to and from your job. It’s this never ending cycle of building a life where you HAVE to work a job to pay for things that you get to make you happy. You literally spend all of your money to try and make you happy at night and on the weekends to forget that you hate your job.
Those of us in the FI community realize that happiness does not come from stuff, but rather people and experiences. If I could wake up and do anything I wanted that day, chances are that I would want to spend it with my family, friends, or go traveling somewhere. While it is nice to have cool and fun materialistic things, chances are the reason you enjoy those activities is because of WHO you are with. Happiness can come from much simpler things. You don’t need to be blowing the bank account to have fun or find happiness in this life. FI members challenge this by coming up with tons of free ways to find joy in your life. They are choosing to save their money and immediate gratification to have way more money later to buy their freedom.
Important side note: not everyone in the FI community hates their job. This is not a job hating community. Some FI people LOVE their jobs, but they prefer the FI lifestyle because it gives them the one things more important than a nice job and a good paycheck: FREEDOM.

If you had to summarize what everyone in this community is fighting for, it is freedom. Whenever you have enough money to live independent from your job, you literally have the freedom to do WHATEVER you want. Some members love travelling. Some love to work on their hobbies. Others take a very active role in their kids’ lives. Some work on their art or writing. Others still work, but jobs that they are passionate about, even if they pay less. There are FI members who are in their twenties and all the way up through their seventies and eighties. And now that the original FI members are having kids, there is an entire second generation of FI kids starting their own journeys. This all sounds so great, but this is obviously for the rich and lucky, right? WRONG!

There are several ways that people get to FI, but the overall goal is to have enough passive money coming in to cover your expenses. Passive income, meaning from investments accounts, real estate, or passive hide hustles. While I plan to go into further detail in other blog posts, here are the main pillars of FI:

1. Lowering your expenses – As I discussed earlier, many of us realize how most Americans (and really just humans in general) are spending way too much money. How do we continuously push ourselves to live paycheck to paycheck? There are so many ways to cut back on expenses in ways that you don’t even realize are killing your bank account. Even though it is not always fun, as I refer to myself as a reluctant frugalist, is can be one of the most important impacts on your FI goals.
2. Increasing your income – On the other end of the spectrum, you can always increase your take home pay. While many in the FI community have great jobs, we are not talking about multi-millionaire tech start up creators or CEOs. We are talking about accountants, a ton of engineers, IT consultants, factory workers, writers, and even teachers. These are people who often create side hustles to bring in some more money than just their 9-5.
3. Increasing your savings rate – Now that you have lowered your expenses and increased your income, it’s time to do the hardest part: saving that money instead of spending it. While it seems that most money experts are recommending 4-10%, many people in this community save between 50 and 70% of their income! They do this through plenty of great tax-deferred investment vehicles, working hard, and paying themselves first. I plan on going into further detail on the different types of investments you can get involved in.
4. Real Estate – Many in the FI community are die-hard real estate lovers. While many argue and debate over the pros and cons of buy verse rent, many love to buy properties to create passive income streams by renting them out. Whether people are house hacking or creating rental empires, many in this community have found this monthly cash flow to be a great way to get to their FI goals earlier.
5. Tax Hacks – There is no other community that you will find people more interested in the tax code and their individual filings. There are so many amazing people in this community that have done extensive research to find tips, tricks, and loopholes to help you keep as much money as you can in your pocket. This pillar is even more important once you hit your FI goal.

Literally at any time. Whether you’re in college, a parent, or about to retire, there are so many things that you can learn from the FI community. Everyone can benefit from the philosophies and methods that people use to create more financial freedom in their lives.
If you want to work for 45 years, spend your money in the present, and retire in your late 60s, then this might not be the place for you. But if you are willing to learn and work hard at saving at a much higher rate for 10-15 years, creating enough wealth for you to live off of just the interest, then pay attention. I will be going over each of these questions in more depth in the coming articles. But at least when you keep seeing FI, you know the who, what, how, when, and why!

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About Dave 12 Articles
I'm the Common Cents Millennial and I am here to change how you think about your finances. Follow me as I struggle with student debt, side hustling, budgeting, lowering my expenses, and my path to early retirement. My goal is to go from $150k in student debt to early retirement in 15 years or less!

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