It seems like everyone these days is talking about how to achieve financial independence, but what the heck does that even mean? A basic definition of financial independence, commonly referred to as FI, means having enough income to pay your living expenses for the rest of your life without having to work full time. It doesn’t always mean early retirement, because you may still choose to work. You have achieved financial independence when you no longer have to work unless you want to.
Different Strokes For Different Folks
The important thing to know about financial independence is that is varies greatly by individual or family. That is because standard of living varies. My idea of a frugal lifestyle may be different than yours. Therefore the amount required for me to pay my living expenses without additional income is different than the amount required for your living expenses.
So How Do YOU Define FI?
Hopefully by this point, you have established a budget for your current living expenses. If not, click here to get started. Now your budget will cover your current expenses, but you may have a goal of changing your lifestyle in the future. For example, you may be renting an apartment and working towards owning a home. This leads us to the next step, goal setting.
In order to determine your definition of financial independence, you will need to establish some financial goals. FI is not just about being able to cover basic expenses, but being able to cover anything unexpected as well. For me, in addition to being able to pay my living expenses, financial independence also means being debt free, including a home.
My parents live and travel full-time in an RV. While they both have pensions from the military that will cover their living expenses, they have continued to work remotely until they are debt free. Click here to read more about how they work from the road while traveling full-time.
How To Achieve FI
The bottom line to achieving financial independence is to make more money than you spend. That way you can use the excess to save/invest to cover your future expenses, as well as an emergency fund for the unexpected. Throughout this website, I’ll cover numerous strategies for generating income, as well as saving and investing on the website, but for now just know that the primary method to get there as quickly as possible is to live below your means. The first step to ensure you are doing that is to establish a budget that is in line with your financial goals. Click here to get started!
Follow along with us here on the EFF Lifestyle as we share tips and ideas for effective finance and a frugal lifestyle aimed at helping you achieve your financial goals!