Financial
Independence?
So you have decided to start the journey to financial independence (FI), but where do you begin? This guide will walk you through the basics of FI. Financial independence is a personal choice and journey - so if something doesn’t fit your lifestyle - thats okay! Use the tips you find helpful and toss the rest.
Aim for a savings rate of 40-50%. That probably sounds like a lot–and it is! But if you adhere to the traditional 15% savings rate, it may take 40 years to reach financial independence. So save as much as you can and optimize them in investments.
Saving is Sexy
01
Saving Tip: Are you taking full advantage of your employers retirement savings program? If your employer has a 100% match you can DOUBLE your savings by maxing your contribution.
Lowering your living expenses can help you reach financial independence in two ways:
1. Lower living expenses allow you to save more money.
2. Lower living expenses means you need less in your nest egg
Lower Living Expenses
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Saving Tip: Have you considered cutting your cable/satellite and use Netflix and other less expensive options for entertainment? Also, try driving an older car or negotiating for a lower cell phone bill.
Prioritizing paying off debt is important in the path to financial independence. The sooner you pay off your consumer debt the sooner your financial freedom clock begins.
Eliminate Debt
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Saving Tip: If you currently have credit card debt, consider doing a balance transfer over to a card with a 0% intro rate and pay it off as quickly as possible.
The path to financial independence is not about living a life of deprivation. You can travel more than you realize for free or very cheaply using travel rewards. The general idea is that you use credit card rewards (earned through sign-up bonuses) to cover your travel expenses.
Use Travel Rewards
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Saving Tip: If you don’t have excessive credit card debt and can responsibly manage credit cards, consider a card that has travel rewards.
Housing is likely your largest expense. Getting this for free or very cheap goes a long way towards increasing your savings rate. House hacking is when you find a way to eliminate or greatly reduce your housing costs.
House Hacking
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Saving Tip: Do you have a family member or friend you can share housing with? Can you buy a duplex and live in one half while renting the other half? Can you downsize your home to reduce costs?
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If you choose to go to college, don't pay full sticker price! By optimizing all the great programs and scholarships out there, you'll save thousands of dollars in tuition and living expenses, and maybe graduate quicker too.
Hack College
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Saving Tip: Contributions to your state's 529 plan are often deductible from your state's income taxes. Consider maxing out your annual tax deductible amount.
Aside from housing, your car and the costs associated with it is likely one of your largest expenses. Reducing or eliminating the amount you drive can help you reach FI faster.
Automotive Hacks
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Saving Tip: Can you rideshare or take public transportation to work? If a car is necessary, drive a car that is reliable and inexpensive to maintain. Finding a mechanic that is specific to your car can also save you money.
