Have you ever thought you understood something only to later realize that you were wrong? I’m sure I’m not the only person. Some time ago I realized the point of financial independence. However, the definition of financial independence is what I had all wrong. And for that reason, I want to share the correct definition of financial independence as well as the point of it with you.
In June of 2018, my second child was born. I had just started a new job a few months prior. The benefits were great, the pay was enough to the point where we had a surplus of funds per month even if Kim didn’t work at all. The only problem is that since I had just started the job I didn’t feel comfortable taking the paid FMLA so soon after starting. Honestly, who wants to start a new job then say “Hey, thanks for paying me all this money to join your company. Now I’m going to take 12 weeks off”. That would not be a good look. And by law, they wouldn’t be required to hold my position.
A big part of the reason I wasn’t comfortable taking FMLA is that we need my paycheck. I can’t tell you how much this eats at me. And don’t get me wrong, I enjoy what I do and the company I do it for. However, if I had a million in investments, which would produce enough to cover our household expenses, would I be more comfortable taking the company paid FMLA? Possibly. Something I often think about is: would I have told them that I could start a few months after the birth of my son so I could be with Kim and get to know my new child? I would have done that in a heartbeat!
My Realization of Financial Independence
Even though we’re on the right track financially I realized something at this moment – as much control as we have over our finances, our decisions are still not completely our own because we need a paycheck. I realized the importance of financial independence.
I enjoy reading about personal finance. Not necessarily from the finance experts, but from normal people who have done unbelievable things like retire in their 30s, 40s, or even early 50s. These folks are part of the FIRE (Financial Independence, Retire Early) Community. I don’t necessarily need the ‘RE’ but the ‘
Financial independence means you have enough income from investments to pay your living expenses for the rest of your life without having to work full-time. It means that you can buy your financial freedom.
Before finding this community I always thought some obscene amount of money was needed to get to financial independence based on your income. I’m talking about $3 million plus. I would start to get overwhelmed thinking about how in the world are we going to save this much money for the future and enjoy life now? I had no idea how to actually determine how much money I needed for FI or to retire. Then I ran into this post. It turns out the amount of money you need isn’t determined by your income at all. It’s determined by your expenses. Think about that for a minute. How much money it takes for you to reach financial independence is solely determined by how much YOU spend.
Above I gave you the information that you need to use to calculate your FI number. This is our goal. It’s a huge scary goal. But, when you get to this number you have the choice to continue working for a paycheck…. or not. Don’t let your lifestyle ruin your chance for financial independence. Save some money so you can make the most important purchase of all: your freedom.