When I first started following the Financial Independence movement back in 2015, everything seemed to be out of reach. We had high overhead costs from maintaining our waterfront home in Canada, and we paid extremely high taxes. I could not see how we would ever be financially independent, and the thought of slogging it out until 65 was depressing.
Every move, good or bad, edged us towards 2022 when we hit our FI(financial independence) or Work Optional number. Over time, I realized that there is no universal secret sauce to financial independence. It’s accessible and available to anyone, at any age, anywhere in the world. This is what makes it so empowering.
The power of financial independence
Most of the people I followed online or learned from had attributes in common that either came naturally or that they developed. The other reassuring aspect was that people from all kinds of backgrounds had achieved semi-retirement or work-optional status within a few years once they put a plan in place.
How to get there
No matter where you are in your journey, you can make adjustments to your life to get to where you want:
Track your spending
Personally, I go through phases where I track everything and phases where I don’t. Normally I track our spending when things are relatively stable and predictable. As well, since I pay for almost everything by credit card, it’s easier to track our spending since I can just download the online statement and create categories like restaurants/delivery, groceries, utilities, car, shopping, personal, and entertainment. Though I’m using Google Sheets these days, you can also use an app like Mint.
You might be wondering why I pay for everything by credit, and that’s because I pay off my credit card in full each month. As well, I use credit cards with rewards — either travel or cash back.
If you can’t trust yourself to pay your credit card off every month, use cash.
Save while you’re young
There is a massive benefit to discovering FI or saving while you’re young. The longer you can benefit from compound interest, the better. When you’re younger, you can weather economic storms (like this one) without panic. Finding ways to save in your 20s has a massive positive impact on your lifetime savings potential.
On the other hand, don’t be discouraged if you’re starting your FI journey late.
Our big break came when I was 43. We were able to save enough money in 4.5 years to become work optional.
Increase your savings rate
On the savings spectrum, there are so many ways you can make this work to your advantage. The first step for anyone starting their FIRE journey is to, of course, know what your average monthly savings rate is. If you’re doing the normal employer match program, you’re likely saving 10% by default. However, for many FIRE enthusiasts, they’ve retired early by saving 50% or more of their earnings. This requires significant lifestyle changes especially in the big ticket expense items — accommodation, transportation, and earnings.
- Accommodation: There are so many hacks for accommodation. Depending on your current spending, you can rent out part of your home, downsize, or get a roommate. Where you live is also hugely important, so if you’re working remotely, could you move to a cheaper neighborhood or country?
- Transportation: Could you sell your car and take public transport instead? Instead of two cars, could you go down to one?
- Earnings Potential: If your work performance is good, could you ask for a salary increase? Could you pursue a role with more responsibility and higher pay? Alternatively, could you work a side hustle? Have a yard sale? Rent out part of your home? Teach online? Honestly, the possibilities are endless.
Having a remote role naturally allows you to save more with little effort. Having worked remotely for nearly a decade, the best piece of advice I can offer is to automatically save everything you would have spent for an in-office role (gas and transportation, restaurants/coffee shops, parking fees, corporate clothes).
Don’t be like most people and succumb to lifestyle inflation which essentially means that as you earn more, you spend more.
Depending on where you live, working remotely can easily translate to $1,000 or more each month, which with the magic of compound interest, can support an earlier retirement date.
Similarly, calculate your commute time and re-allocate this to a side hustle project where you can earn additional money for savings. If you spend 30 minutes getting ready and 45 minutes each way commuting, then that equates to 2 hours daily that you can allocate to earning extra money. Online consulting, writing, or teaching can bring in additional money for savings. For inspiration, check out Alexandra Fasulo who just launched a new book ‘Freelance your way to freedom’.
As an example, back in 2017, I saved $12,568 CAD per year by working remotely. As well, I earned an additional $15,000 CAD on top of my full-time salary by offsetting my commute time with consulting.
Finally, if you are working remotely, could you move to a lower-cost area, thus further accelerating your savings? In my case, when we were still living in Canada, I lived in a very low-cost city, but still had the benefit of a city salary. This could potentially save you another $1,000 or more in housing-related expenses.
Work in tech
One trend I’ve noticed among the FIRE community is that many early retirees, including myself, worked in tech.
I know there are a lot of layoffs happening in tech, but this is cyclical and will pass eventually.
I speak from experience since I was recently impacted by layoffs. Though we had already reached FI, I definitely appreciated the severance package, in which I invested.
The great thing about startups and tech is that they generally offer high salaries, annual bonuses, stock options, and annual increments. Many are 100% remote which means you get that added savings to boost. Even if you don’t have a background in tech, there are so many low-cost ways to retrain through Coursera, Udemy, tech boot camps, etc.
Another lesson I’ve learned along the way is to forget about loyalty. Jumping a ship every few years is a fantastic way to increase your salary and stretch your wings. Five years is the longest I’ve ever stayed at a company.