Today marks the introduction to a seven part series about how to become financially independent. Each of the seven parts will talk about a different way to help you get retired faster. Not all the steps will be suitable for everybody so pick and choose your favourites.
Seven Ways To Get Financially Independent In 2017
What is financial independence?
Financial independence (FI) is a term to describe a person who no longer needs to work a full-time job to be able to fund their living expenses. How people operate after independence is achieved varies from person to person. Some will work part-time to help fund life’s luxuries others will prefer to work on artistic pursuits and not worry about money. What you do with your time once FI is achieved is entirely up to you.
How can I become financially independent.
Essentially once you have at least as much unearned money coming in as is going out you are financially independent. Generally there are two ways to achieve this. Either you increase the income or you reduce the expenses. Doing a combination of both will help speed up the process even further.
Income can come from various means other than employment. These include; owning a business (but not running it), income from stocks and shares or renting out property.
Keeping your expenses as low as possible for the long term will allow more money to be saved and less total money to be required. Most people’s largest expenses are accommodation, cars and travel.
When Will You Be Free
The simple calculation for working out FI looks something like this below.
Years to FI = ((Yearly Expense / Withdrawal Rate) – Net Worth) / (Net Salary * Savings Rate)
This doesn’t take into account things such as growth on investments or inflation but this will give you a starting point to work these things out.
This simple spreadsheet will do the calculation for you. Below is an example of how the sheet appears visually. Simply fill in the blue boxes and the green box will populate an estimated timeline for FI.
Part One: Moving to a new country – Here
Part Two: Starting a side hustle – Here
Part Three: Alternatives to your car – Here
Part Four: Saving money on food – Here
Part Five: Invest in yourself – Here
Let me know in the comments how you are speeding up the journey to FI.