My Definition of Financial Independence
November 16, 2007
photo by soundman1024
Turning 35 this year was a giant eye opener for me this year. No longer am I 22, 26, or 29, and I am fascinated and terrified at how fast I got here, to age 35. The thought of hitting 40 in just 5 years is like a splash of cold water in my face. Now, don’t get me wrong, I still consider 40 to be young in the grand scheme of things, and I’m sure that anyone older than that probably remembers feeling the same apprehension that I do now.
So here I am, thinking about the future, about my goal of retiring at age 55, in 2027, with enough money accumulated to live on, some to give away, and some to leave to my kids.
So what’s financial independence to me? In a nutshell, it’s not having to rely on someone else, aka “an employer” to be able to feed my family and pay my bills. It means being able to have a stream of income, hopefully from various sources, without it being subject to the whims and decisions of another person or entity. In other words, it’s having an income engine that I have been able to set up, that is independent of any one force.
Can my income stream be totally protected from the outside world? No. To be realistic, I know that if I have money in investments, things can go down. But hopefully, if I diversify enough, I can limit the possibility that I’ll lose money.
Am I there yet? No way. I’m not even close. I often ask myself, “Where did the last 10 years of income go?” Mainly it went to the expenses related to having a house and 3 kids and trying to live on 1 income. I have less than $5000 saved for retirement now and I have a ling way to go before I accumulate the million or so I’ll need in retirement.
Could I have saved more? Probably. I lacked any real financial planning skills, mainly because I had the attitude of “I have plenty of time to save for retirement.” My corrective action? One of them is that I started and automatic deposit into my Fidelity Roth IRA account last year, so I can start the ball rolling without having to “think” about it.
I think most people are resigned to the fact that they’ll never be “financially independent”. I have a vision and I’m aiming to accomplish it, and I hope it encourages others to do the same.
So I’m declaring independence day on May 17th, 2027.
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