“You will never know true freedom until you achieve financial freedom.” 

― Robert Kiyosaki

It was June 1, 2015. I started working in a job for the first time in my life. I was ecstatic. I felt top of the world since I was making money. I thought I was set for the rest of my life. I started buying stuff by swiping my credit card for almost everything.

It was Jan 2017. I had been making money for more than a year. On my commute to work, I was bored of listening to the same music. I heard friends talking about listening to podcasts. I thought I would give it a shot. Since I was making money, I thought I would listen to a money podcast. I stumbled across an author while listening to an episode of the ‘Optimal Finance Daily’ podcast. That’s when I first came across the book, ‘I Will Teach You To Be Rich‘. The author was Ramit Sethi.

I immediately bought the book and finished it over one weekend. One of the questions he asked in the book was — “What’s your net worth?”. I had never heard the term before. I wanted to know my net worth. To come up with the net worth, I had to add all that I had and subtract what I owed. I instantly calculated mine. It was -2036.

I was surprised. I felt guilty about myself. I thought, “I’ve been making money for close to 2 years and still I have a negative net worth?“. That’s when I knew I was living paycheck to paycheck. I was ignorant about my financial situation. 

I then started reading more books on how to come out of this situation. I started learning about money. I first came across the term ‘Financial Independence’ after reading the book, ‘The Simple Path to Wealth‘ by JL Collins. It changed my life.

What is Financial Independence?

In simple terms, Financial Independence (FI) means no longer having to work for money. It is the stage where the passive income from your investments pays for your expenses for the rest of your life.

Be aware that FI doesn’t mean you don’t work, it is just that you don’t need to.

My eyes wide opened after coming across the concept of Financial Independence. Instead of living paycheck to paycheck, I can live off my savings and investments for the rest of my life. Heck yeah, I want it!

“Money can buy many things, but nothing more valuable than your freedom.” 

― JL Collins

There are two paths when it comes to making money and living off of it. One is the ‘Standard Path’ and the other one is the ‘FI path’. Here’s the difference:

Standard Path

The standard path tells you to get good grades, go to a good college, get a good job, buy an expensive house and a luxury car, take 4 weeks of vacation each year, save 10% and retire at age 65.

There is nothing wrong with this path except if you don’t like the journey. A lot of people are tied to a job they don’t necessarily enjoy because they have an expensive lifestyle that requires them to have that high income.

Ask yourself: What’s the point of being miserable for the majority of your waking hours for the sake of having an expensive house and a luxury car?

“True success is exiting some rat race to modulate one’s activities for peace of mind.” 

― Nassim Taleb

If you’re living paycheck to paycheck, quitting a job means – being unable to make monthly payments. This will automatically put you in a situation with no house or car and a family to feed. You go to work to collect a paycheck just to prevent lenders from coming to repossess what you already have. That’s why it is very difficult to quit your job when you live paycheck to paycheck.

We work for the paycheck, live for the weekend, and spend our money to relieve the stress that comes from it. We don’t truly have time to enjoy an expensive house or a luxury car because we’re stuck in a job to earn money to meet the monthly payments.

We are constantly in the fear of losing our jobs and our monthly paychecks. We feel less secure in our jobs, even those who love their jobs and can’t imagine retiring early. It’s a rat race – an endless, self-defeating or pointless pursuit.

If you have a mortgage, car payment, no money in the bank, and a family to feed – it’s very hard to quit a job you don’t like.

Is there an alternate or you just have to grind through this until age 65. Fortunately, yes!

Financial Independence (FI) Path

“Like Warren [Buffett], I had a considerable passion to get rich. Not because I wanted Ferraris―I wanted the independence. I desperately wanted it.” 

― Charlie Munger

Instead of staying in a job until the traditional retirement age of 65, FI allows you to quit your job much early. Depending on your situation, you can achieve FI in 10-15 years. Instead of using our money to buy more expensive items and treat ourselves to relieve stress―just like what the standard path tells us to do―we can use that money to become financially independent. Every dollar that you invest now will buy you a day of freedom from work later. Rather than the traditional savings rate of 10%, FI recommends a higher savings rate (30%+).

Why pursue FI?

FI equals freedom. Freedom to do what you want to do, when you want, with whom you want. Nothing more than that. Make time for things that are truly important to you, instead of mindlessly following the standard path that everyone else takes. Every day of freedom you can buy before the standard retirement age of 65 is a big win and worth pursuing.

Ideally, money shouldn’t decide what you should be doing in life. But, when money influences your decisions, it is likely that you might make a bad decision.

More than retiring and sitting around doing nothing, FI is more about the freedom to do what you want in your life which is in alignment with your values. Time is your most precious nonrenewable resource.

I realized that FI is more important than displaying high social status. Passive income is what makes FI possible.

Once I started my path to FI, I moved away from mindlessly sleepwalking through life to living more intentionally. Once I started living intentionally, saving and investing decisions became easier because I have a purpose – reaching FI.

To achieve FI, save and invest aggressively and let the compounding do its magic. I will write more articles on how to achieve FI. Here’s one of my favorite quotes when it comes to becoming wealthy:

“You are not going to get rich renting out your time. You must own equity, a piece of the business to gain your financial freedom.” 

― Naval Ravikant

Key Takeaways

Financial Independence (FI) is the stage where you are no longer worried about money and have the freedom to do whatever you want, whenever you want, and with whomever you want.

To achieve FI, save and invest aggressively and let the compounding do its magic. I believe so powerfully in the power of compounding to become financially independent.

Money may not solve all your problems, but all I know for sure is it can solve your money problems. The best thing money can buy is ‘Freedom’. ‘FI’ is a superpower!