I first wrote this post about financial independence in 2012, soon after I had left my day job in the finance industry. It was a 13-year slog, but I was thrilled to leave but also a little worried about the unknown.
The idea of this post is to capture the feeling of financial independence and share how it felt to finally get there.
In this update, I'd like to add more color on the reasons to strive for financial independence. Today, I'm 46 years old and a father of two young children. It's interesting how our perspectives change as we get older.
Since 2012, I've written about the negatives of early retirement nobody likes talking about. I also shared what I would do differently if I got to retire all over again. The posts are worth reading.
I want to encourage everyone to save more, invest more, earn more, and pay better attention to your finances. I can assure you that the reward is worth the “sacrifice.” Because looking back, I felt like I should have saved and invested even more and worked harder!
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 or whichever religious holiday.
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.
However, the good feeling of financial independence fades as you get used to your situation. Your focus shifts towards crossing off all the things you've always wanted to do before it's too late.
Reaching Financial Independence In 2009
Technically, I've been financially independent since 2009 when I realized my passive income could cover all expenses. This is the one definition of FIRE I believe in. 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 gross in Honolulu, where we'd relocate to. Breakfast would consist of papaya or mango picked from my grandfather's farm. Then we'd go boogie boarding until lunch and eat some more fruit and corn from the farm. We'd then take a nap and then do some writing to stimulate the mind.
Today, we call this type of financial independence Lean FIRE. It sounds like a great lifestyle. However, I just wasn't ready to live it just yet at 31 years old.
My career and my wife's careers were both starting to take off until the recession hit. I decided to work three-and-a-half more years to feel more secure. We also started thinking about having kids.
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. I had lost 35 – 40 percent of my net worth in just six months and there didn't seem to be a bottom at the time. Thankfully, the world didn't end just like the world didn't end after the pandemic hit.
I decided to hang on for the recovery and start Financial Samurai. No longer did I want to delay an idea that had popped when I had graduated from business school in 2006.
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 as a result. The reason? A severance is based off your salary, not a bonus.
Uncertainty Nowadays Feels Better
One of main reasons to strive for financial independence is to minimize financial worry. It's the angst and worry that drives some parents to stay miserable at well-paying jobs to one day accumulate generational wealth. It’s so my money that they’ll likely not spend it all before they die.
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, your children, or your parents.
In 2009, I was 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 are fooling themselves with being OK retiring near poverty.
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 as a middle-aged man.
In 1Q2020, my net worth fell about 6% from its peak due to the pandemic-induced panic. It still felt like a huge punch in the gut because the absolute dollar amount was much larger than when I lost money during the 2008-2009 global financial crisis.
However, my worry was lower this time because my net worth was more diversified and more defensive. Further, after almost 12 years of operation back then, Financial Samurai could not be shut down.
Passive Income's Importance
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.
Be careful having children if you don't feel like you can comfortably take care of yourself and your partner yet. Children not only cost more money, they require a tremendous amount of your time and energy when they are young.
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 the world isn't fair, you will only drag yourself down. Control what you can control in order to get what you want.
One of the things that will help you during times of chaos is accurately forecasting your passive income streams. If you do, you will have less fear and more confidence navigating the storms.
Reasons To Strive For Financial Independence
To provide some motivation, here are some reasons why you should strive for financial independence.
1) 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? All of these people use to annoy me, but now their actions hardly bother me anymore. I just stop associating with them, because I no longer care about lost potential opportunity.
The lightness you feel about no longer having to interact with people you don’t like is a tremendous relief.
2) You begin to appreciate the government a little more.
When you're working hard at your job or running a business, you may 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 when they don't have to pay more themselves.
For most people, the government takes more in taxes than most people save! How crazy is that? Meanwhile, you witness all the government waste, pandering, and corruption. 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. In other words, the return on the taxes you pay increases.
I have friends who play tennis or pickleball almost everyday thanks to government unemployment benefits, a government pension, or other types of government benefits. They aren't rich, but they love life and are not stressed.
Strategically, it's better to retire when the government is big and taxes are high. This way, you get to pay less taxes and enjoy public goods more.
3) Financial independence improves your health.
Prolonged 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. However, it wasn't until I became financially independent did my elbow and TMJ disappear! My grey hairs also went away in 2012 and haven't come back since.
The health benefits of early retirement are priceless. Every time I'm sick, I wish to give anything to feel better. It's easy to take our health for granted when we are young. Random health issues start popping up more frequently after 40.
4) 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. Working in finance was a cutthroat business where underperformers regularly got let go. A little bit of paranoia is good for everyone. It's just an annoying feeling.
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 in front of my surviving colleagues. Why me? I’d wonder.
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 gives you dignity. You will also feel like you won the lottery as you got to decide when to leave with money in your pocket.
When you're financially independent, you no longer fear losing your job. As a result, you might become more vocal at work to make things better. Ironically, you could get paid and promoted faster as a result.
If you're financially independent and have no job, then that constant paranoia of getting laid off goes away completely. Your worry shifts to having a strong-enough investment portfolio. You feel the lightness of being 100% free.
5) Financial independence enables you 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. But working on your passion projects creates a more fulfilling life.
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.
After reaching my 10-year writing anniversary in 2019, I decided to do more experimenting.
The first thing I did was write a new personal finance book. It is a book that was missing from the market because it addresses many of life's biggest dilemmas
I should also self-publish another book to create more defensive income streams. But writing books takes a lot of time and discipline.
As a result, I decided to record more podcasts because they are fun and easy to do. After finally figuring out how to use the podcast interviewing software in 2023, I will be interviewing more authors, entrepreneurs, and interesting people.
6) 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!
7) Financial independence makes you 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 also 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.
8) 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. Your survival doesn't depend on your reputation, a person, or a company. Let me share a small example.
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 or think independently. For the sake of mob protection, individuals will dilute their beliefs. It's sad to witness.
To be able to never have to back down from anyone is a wonderful feeling. So is being able to live your truth. Funny enough, once you have f you money, it's hard to tell others to F off! The main reason why is because it’s easier to move on.
9) You care less about what other people think.
One of the best reasons to strive for financial independence is because it enables you to care less about what 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. I don't suffer from FOPA, ie fear of other people's approval anymore.
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 as great of a need to one-up your dissenter 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. I've used many critical e-mails and comments as ideas for writing new posts.
For example, in the past, I often got chased aggressively by the Internet Retirement Police (IRP). As a result, I decided to make lemonade and write about my experience. Now the article is one of the top searched posts on Google. So fun!
10) You can explore new industries without worrying about pay.
Between 2013 – 2105, I consulted with several financial technology companies, including Empower. I learned so much about Silicon Valley startup culture and even made a 3X return on my stock options once Personal Capital was purchased by Empower in 2020.
I consulted for a Y-combinator Series Seed company with only six employees. Even though the company failed, it was a great experience being in the trenches with those men.
Since 2017, I've been a high school tennis coach. For three-to-four months a year I would get paid only $1,000 – $1,100 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.
I talked about giving up on retirement and going back to work because both my kids will be in school full-time by September 2023. Sniff. But one job I have been thinking about is joining the Golden State Warriors in any capacity so I can be around the players and watch the game. I'd also love to understand more about the business of basketball.
11) You make your parents proud (or at least give them relief)
Our parents tend to give us everything and ask for very little in return. They hope we can simply lead happy, self-sustainable lives that are filled with purpose. 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 doing what I want feels good. Every one of us have some desire to make our parents proud at some level.
As a parent now myself, nothing would bring me greater joy that seeing my kids find love and doing what they want.
12) 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 parents experienced during the pandemic.
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 and didn't seriously entertain the idea of starting a family until our mid-30s.
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.
Thankfully, I discovered that even if you are an older parent, you might have the capacity to spend a lot more time with your children before they leave the nest. I did the math and because we are financially independent, we will end up spending more time with our children compared to if we had them five years earlier while working.
13) Financial independence provides greater happiness for longer
Perhaps the best reason to strive for financial independence is greater happiness. Not only do you feel happier, you get to feel happier for longer!
When I first left my job, I was happier, but I was also filled with a lot of uncertainty. Only after consulting for various startups, coaching high school tennis, becoming a father, and more did I realize I had a higher steady state of happiness.
You can check out my life satisfaction by age chart to learn more about what I mean. With less monetary worry, you'll be able to focus your time and effort on the things that truly matter.
Just make sure you've got several things you are retiring too. Because if you retire without a plan, you could find yourself feeling melancholy.
Striving For 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 fourteen years after leaving work behind, the value I place on financial independence has only increased. This realization has motivated me to keep on writing and recording 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, hopefully, I can help you get luckier as well!
A Tool To Reach Financial Independence Sooner
To reach financial independence sooner, it's important to track your net worth. Sign up for Empower, 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. If you link over $100K in investments, you're eligible for a free financial planner review, a $795 value.
I’ve been using Empower 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.
Achieve Financial Independence Through Real Estate
Real estate is my favorite way to achieving financial independence because it is a tangible asset that is less volatile, provides utility, and generates income. Real estate accounts for roughly 50% of my ~$380,000 in investment income.
My favorite real estate platform is Fundrise, which manages over $4 billion in assets across multiple funds. Fundrise predominantly focuses on investing in residential and industrial real estate in the Sunbelt, where valuations are lower and yields are higher.
Private real estate investing offers individuals a way to diversify their real estate holdings away from their existing city. Investors also get to earn passive income and dampen portfolio volatility. Personally, I've invested $810,000 in private real estate funds since 2016.
Reader Questions And Suggestions
Readers, how is your path to financial independence going? Do you feel the journey is ever over? If you are financially independent, how does it feel? Why aren't more people willing to save and invest aggressively to have more financial freedom in the future?
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