Financial Independence (FI) Basics

Financial Independence means having control over your own time. You don't have to work because you have enough wealth or assets to pay for your living expenses. If you acheive FI, work becomes optional and you can spend more time on what you love. Sounds like a worthy goal, but how can you get there?

The basics:

1. Learn where your money is going. Review your spending for the last couple of months.
2. Earn as much as you can.
3. Spend less - be frugal. Cut out all wasted spending. Spend on things you need & love.
4. Invest the difference (Earnings - Spending) in assets, like an Index Fund (VTSAX, SWTSX, FSKAX, e.g.).
• Index Funds - a simple, hands-off asset that grows along with the United State Economy.
5. Find your FI Number (Financial Independence Number):
• Your FI Number comes from the 4% rule. That's the amount of money you need to have invested to cover your expenses for about 30 years. The 4% rule is a rule of thumb that estimates how much you can withdraw from your retirement investments each year without running out of money.

25 Years of Expenses = 300 Months of Expenses

Monthly Expenses: $0
Yearly Expenses: $0

-  +

Estimated FI Number: $0

6. Create future projections (FI Projection) to determine when you'll achieve financial independence.
7. Make a Financial Plan
• Pay off your debts first - Plan your strategy
• Snowball Method: Pay off the smallest debt first, helps you check your debts off your list quickly.
• Avalanche Method: Pay off debt with the highest Interest Rate first. This saves you the most money over time.
• How much do you need to invest each month to reach your FI Number?
• When do you want to retire?
• How much do you need to earn to reach your financial goals in time?
• How can you reduce expenses?