I first wrote this post in 2012, soon after I had left my day job in the finance industry after 13 years. I was thrilled, but also a little worried about the unknown. The idea of this post was to capture the feeling of financial independence.
In this revised edition, I’d like to add more color eight years later. It’s interesting how our perspectives change as we get older.
The whole point of this post is to encourage everyone to save more, invest more, earn more, and pay better attention to your finances. I know we’re all tired as hell from juggling so many things while under lockdown.
However, I can assure you that the reward is worth the “sacrifice.” We must keep on going.
What Does Financial Independence Feel Like?
When you finally become financially independent, every day will feel like Christmas morning. If you don’t celebrate Christmas, then substitute Christmas with your birthday.
The feeling is the same as when you were a kid waiting for a present. You go to bed late because you’re so excited. And then you wake up early because you’re so excited!
As an adult, the feeling of being financially independent is similar to when you get into your college of choice or land your first job. Do you remember turning 21 and feeling so thrilled you could legally drink at the bars for the first time? Those were the good old days.
Technically, I’ve been financially independent since 2009 when I realized my passive income could cover all expenses. At the time, my taxable investments and real estate portfolio were generating about $50,000 a year.
Life would have been very simple living off $50,000 a year in San Francisco or Honolulu. Today, we’d call this type of financial independence Lean FIRE. It wasn’t a lifestyle I was ready to live just yet at 32 years old.
My career and my wife’s careers were both starting to take off until the recession hit. I decided to work three more years to feel more secure.
There was one point during the 2008-2009 recession, however, where I thought I’d have to start all over if things continued to worsen. Thankfully, the world didn’t end just like the world won’t end today.
I decided to hang on for the recovery and start Financial Samurai. My hope is that during the current 2020 recession, all of us can find some ways to hang on and boost our income as well. If we survive, we will come out of this terrible time stronger.
Back in 2009, financial firms actually raised base salaries by ~70%. I was shocked when my base salary jumped from $150,000 to $250,000. The purpose was to comply with the government’s desire to lower year-end bonuses.
Ironically, the government enabled finance workers to live more freely with higher cash flow. Those smart enough to negotiate a severance when thy departed received much higher severance packages. The reason? A severance is based off base income, not a bonus.
The employment situation is worse today. However, the financial support we’re receiving from the government is much greater. Let’s hope the lockdowns don’t last too much longer. Further, opportunities to make money online are easier and more ubiquitous as well.
This Time Feels Different
One of main purposes of being financially independent is to minimize financial worry.
Usually, when you have more money you tend to worry less about running out of money. However, there is certainly a truth to the saying, “more money, more problems.” Your worries tend to just overflow to something else, like your health or your parents.
In 2009, when my net worth declined by about 35% in six months, I was very worried. I worried I would lose all my money and then lose my job. Therefore, I probably wasn’t as financially independent as I thought. Perhaps I was fooling myself much like some folks are fooling themselves today with being OK retiring on income near poverty levels.
When we are younger, we tend to believe we are more invincible. We think we know more than we really do. I see this truth more clearly now at 43 years old.
In 1Q2020, my net worth fell about 5% from its peak. It still felt like a huge punch in the gut. However, my worry was much lower this time because my net worth is more diversified and more defensive. Further, after 11 years of operation, Financial Samurai has turned into a steady income source that cannot be shut down.
I realize today that money will always be somewhat of a concern, even if you are financially independent. The more people who depend on you, the more you will feel the pressure to provide. However, the concern tends to fade into the background so you can focus on more important things like your friends and family. You also need to have a purpose as well, or else you may get depressed.
Money is only a means to help facilitate these goals. Ironically, in order to stop caring about money, you’ve first got to care a great deal about money.
Sacrificing and hustling when you still have the energy is worth it. Waking up a couple hours earlier to work on a new income source is privilege. Adopting an abundance mindset will make you richer than if you adopt a welfare mindset.
If you are torn between being an optimist or a pessimist, choose optimism! If you’re annoyed that the world isn’t fair, too bad. Control what you can control in order to get what you want.
Reasons To Strive For Financial Independence
To provide some motivation during this uncertain time, here are some reasons why you should strive for financial independence.
People don’t piss you off as much anymore.
You know the people who are always late because they are selfish with their time? They used to bug me to no end. What about folks who steal your ideas and don’t give credit? I could go on and on about such people in the work place and online.
Or how about people who only contact you when they need something? Seriously, bug off! All these people use to piss me off, but now they hardly ever bother me anymore. I just stop associating with them, because I no longer care about lost potential opportunity.
You begin to appreciate the government more.
When you’re working hard at your job or running a business, you slowly start resenting the fact the government takes more and more money away from you the more you earn. You also don’t like it when other people vote to raise your taxes without having to pay more themselves.
I’m willing to bet the government takes more in taxes than most people save! How crazy is that? Meanwhile, you witness all the government waste. You’re so busy working that you don’t have time to enjoy public services.
When you’re financially independent, you can more easily enjoy the libraries, parks, museums, and concerts all for free during the weekdays. The return on your taxes increases. I have friends who play tennis everyday and kick back thanks to the government. They aren’t rich, but they love life and are not stressed.
Today, we must be appreciative of the government for providing over $3 trillion in stimulus money to combat the coronavirus.
Your health should improve.
Stress kills. During my most stressful working days I developed chronic back pain, tendonitis in my elbow, and TMJ (jaw clenching, teeth grinding).
My chronic back pain has long been cured since reading Dr. Sarno’s Healing Back Pain Book nine years ago. However, it wasn’t until I became financially independent did my elbow and TMJ disappear! My grey hairs also went away and haven’t come back since.
Our health is priceless. Every time I’m sick, I wish to give anything to feel better. We need to remind ourselves how important our health is when we are healthy. It’s easy to take our health for granted when we are young.
You are no longer afraid of losing your job.
I always had a little bit of worry I’d come into work one day and be called up to HR and get fired. A little bit of paranoia is good for everyone. It’s just an annoying feeling.
Finance is a very cyclical and cutthroat business. If I got laid off, not only would I feel angry about being let go, I’d also feel embarrassed as I packed up my box of things.
Part of the reason why I wrote How To Engineer Your Layoff was to empower people to take control of their own destiny. To be able to leave on your own terms is incredibly empowering.
Easier to work on your passion projects.
It’s rare to be able to make a living off something you’d do for free. We call these things passion projects and not a job for a reason.
Financial Samurai has been my passion project since 2009. I treated this site as a hobby for so many years. I wrote carefree, barely focusing on monetization because I either had a job or had enough passive income. Enjoying the process is the key reason why this site grew.
Now that I’ve surpassed my 10-year writing anniversary in 2019, I’ve decided to do more experimenting. Potentially, I’ll self-publish a new book to create more defensive income streams. Or maybe I’ll do more podcasting. Whatever the case may be, it feels great doing what you love. The money becomes just a nice byproduct.
You hang out with people because you want to, not because you need to.
Hell is other people if you are forced to spend time with people you don’t like. When you’re financially independent, you only hang out with people because you enjoy their company, not because you want or need anything from them.
Imagine not feeling the need to respond to every e-mail or request. Feeling OK with 20,000 unread e-mails is wonderful. Imagine not having to pretend you like someone just because they hold the keys to your future. Liberating!
You become less afraid to fail.
So many of my projects have flopped, I don’t know where to begin. Here’s a post chronicling some of my past 15 years of failure. Failure is scary because it is embarrassing. Sometimes, failure can be disastrous financially.
However, if you have the financial means to withstand failure, then you become less afraid to take risks. Think about billionaires like Bill Gates or Evan Spiegel. Because they were born rich, they could afford to experiment with entrepreneurship.
Eventually, you get to the point where you start succeeding because success is partly a numbers game. You can afford to fail. When you can afford to fail, you will feel more free. To create something on your own feels much more rewarding than creating something for someone else.
You stand up for what’s right.
There’s a lot of bullshit in the world that goes unchallenged because people are afraid of the repercussions. How many times have you bit your tongue because you were worried about the consequences?
If your finances are secure, you no longer have to put up with verbal abuse or harassment in the workplace. If you don’t need to rely on a job for money, you are much more able to speak freely.
When you are financially independent, you are more confident to speak your mind when you see an injustice. The reason is because your survival doesn’t depend on your reputation, a person, or a company.
One time, a tennis opponent quit his match after being down 4-6, 1-5, 30-all because of a close baseline call I had made. It was clearly out, but he disagreed. He started cussing at me so I walked right up to his face. I told him not only was he a sore loser, he best apologize for swearing at me.
He was in shock at the confrontation, probably because nobody had ever stood up to him before. Immediately, he apologized and said he was out of line. He realized he could not afford to damage his reputation because he was a professional tennis teacher. Tennis was just my hobby, but to him, tennis was his livelihood.
Online, you see mobs form all the time because individuals are too afraid to stand up for themselves. For the sake of mob protection, individuals will give up their beliefs. It’s sad.
To be able to never have to back down from anyone is a wonderful feeling. So is being able to live your truth.
You care less about what other people think.
Caring less about what people think is hard. We always want the approval and admiration of others. Why else do some people try so hard to seek status?
In the past, I always used criticism to try harder. Today, I approach criticism with more of a ho hum attitude. When you’ve been called every name in the book, criticism no longer bothers you as much.
It feels liberating to have insults and insinuations roll off your back. Because you have less to prove, you don’t. You also don’t feel the need to one up your dissenter any longer because you’re already set.
Not only will you care less about what other people think, you may find ways to benefit from your critics.
For example, every now and then, I get chased by the Internet Retirement Police (IRP) who are close relatives of the Karens. As a result, I decided to share a humorous story about a particular incident. Now the article is one of the top searched posts on Google. So fun!
You can explore new industries without worrying about pay.
Between 2013 – 2105, I consulted with several financial technology companies and learned so much about Silicon Valley startup culture. I even consulted for a Y-combinator series seed company with only six employees. Even though the company failed, it was a great experience.
Since 2017, I’ve been a high school tennis coach. For three months a year I would get paid only $1,000 a month to help 12 teenagers compete for glory. We ended up winning the Northern Conference Championship twice. We were excited to try and three-peat in 2020 until the pandemic shut us down.
Think about all the other jobs you would happily try if money wasn’t a big reason for working. I’m sure you would have a lot more fun.
You make your parents proud.
Our parents tend to give us everything and ask for very little in return. They hope we can simply lead happy, self-sustainable lives. When we are financially independent, our parents worry less about us. We start spending more time with our parents too because we have more time.
Hearing my parents say they are happy that I’m happy is gratifying. Every one of us have some desire to make our parents proud at some level.
It’s funny, but I wrote the initial two paragraphs five years before I had my first child. Instead of entitling this section, “You make your parents proud,” I think a more appropriate title for this section might be, “You give your parents relief.” As a parent, I’m always worried about my kids.
You get to spend more time with your children.
The sooner you become financially independent, the sooner you can spend more time with your children. It’s hard to juggle work and parenting, as millions of people are experiencing now with the lockdown.
Children grow up quickly. It is very rewarding to teach children new things and witness important milestones. When our children become adults, we will reminisce about the time we spent with them. We might even regret not spending more time with them if we worked too much.
My wife and I had children late, which is one of the downsides of trying to achieve financial independence at a younger age. We focused so much on our careers that we didn’t seriously entertain the idea of starting a family until our mid-30s. We also didn’t think we could comfortably afford children in expensive San Francisco.
If you know you want children, I say have children sooner, rather than later. There’s never a perfect time so don’t wait for one. The sooner you have children, the longer you will have each other in your lives. This fact trumps all other arguments for when to have children because you will love your children more than anything.
Financial Independence Is Worth It
Hard work is awesome because the benefits last long after the hard work is done. Don’t be afraid or feel ashamed of obsessively pursuing financial freedom while you are younger. The people who are trying to put you down are too lazy to try themselves.
More than eight years after leaving work behind, the value I place on financial independence has only increased. This realization has motivated me to keep on sharing why it’s important to get your financial life together.
I’ve been called lucky many times and I don’t mind because I am. Whatever wealth we have is mostly due to luck. To not recognize our luck would be disingenuous.
As a lucky guy, I plan to use my good fortune to lead the life I want to live. Hopefully, I can help many people get luckier too with this site.
If you’re considering financial independence, I say go for it. You’ll one day discover the sacrifices you made to get there were not sacrifices at all.
Life is on hard mode now. But the good thing about hard mode is that it can’t get much harder. Sooner or later, life will get back to normal. And when it does, we will cherish our freedom greater than ever before!
A Tool To Reach Financial Independence Sooner
To reach financial independence sooner, it’s important to track your net worth. Sign up for Personal Capital, the web’s #1 free wealth management tool.
In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. I will show you exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible.
I’ve been using Personal Capital since 2012 to make sure my net worth is properly allocated. When you are financially independent, the last thing you want to do is go in reverse.
Readers, how is your path to financial independence going? Do you feel the journey is ever over? If you have financial independence, how does it feel?