I love the idea of financial freedom and wealth creation. There are many like me who love and adore the concept. However there seems to be a huge lack of awareness around us. Through my blog, I have taken a small step towards reducing the awareness.
Picking brains of like-minded people is great first step to understand what works and what does not. I have taken this small step and have started interviewing my friends to understand what they think about financial freedom.
What prompted you to set-off on a path to financial freedom? Was there any event which exposed you to the idea of financial freedom?
I’ve always been an avid saver. Seeing my parents having almost no control over where they were spending money, it became natural for me to be careful with money. Actually I hadn’t heard about financial independence before my brother told me about it in January 2018. I immediately loved the concept of saving up a chunk of money and then live on 4 % for the rest of my life.
I tried some compound interest calculators and was totally blown away by the numbers! I was completely hooked. Was there really a legal escape out of the 9-5? I couldn’t believe it! It was too good to be true.
Compound interest is mind blowing. But it needs an obsession because the results are visible only in the later part of life. I believe that retiring early needs an obsession, a fire within one self. Do you think if it is everyone’s cup of tea?
I do share that view as well. To retire early you must make some kind of sacrifices. You must delay your consumption today, so that compound interest gets enough time to double your money over and over again. To most people this is a sacrifice they can’t stand. Because they want to keep up with the Joneses. They want a brand-new car, a modern house and the newest gadgets. By keeping up with the Joneses it’s hard to save enough money to buy assets. And without assets it’s impossible to retire early. You really must be obsessed to retire early.
It also needs a lot of sacrifices in my opinion. Do you think you have made any sacrifices in this journey? Do you think you will regret making these sacrifices when you are old?
I’ll go into the sacrifices I’ve made on my path to financial independence. But let me change the view on what’s a sacrifice is first.
Did you know that if you’re 40 years old, you only have approx.. 336,000 hours left to live on this planet? Do you really want to sacrifice 1/3 of that time to a job you don’t even like? And don’t forget that you sleep 1/3 of the time as well, meaning that you only got 112,000 hours left doing what you like.
I haven’t even mentioned commuting, getting ready for work etc. that as well eats of your time, but it’s easy to see that we don’t have much time to what we really want in life, right?
To me this is the biggest sacrifice at all. Living an unfulfilled life.
That’s why I sacrifice to live on $1,500 – $2,000 a month now and save 65 % of my income every month (this is for me alone). To me this doesn’t feel like a sacrifice at all.
I do all the things that I want to do today (besides from working 9 – 5). The only thing I want is more time. And that’s the reason I pursue financial independence.
That was an eye opener for me. I have noted that a lot of people tend to go back to work after few months of staying at home and getting bored. Have you thought about taking a sabbatical and experiencing the free life before you pull the trigger?
I’ve thought about taking a sabbatical a lot, but I know that I wouldn’t feel completely free if I took the chance. Now I’m 4 years away from my Financial Independence Goal of $600,000, and I do feel really close to my goal. If I for example took a year off now, I’m sure I would start to think about that year’s lost income and that I’m only delaying my FI date.
It’s quite possible I will get bored after I quit my job, but maybe I figure out it’s okay to work part time? Or travel the world while freelancing? I don’t know yet. What I do know is that whatever you do, you will always earn money along the way.
There is no better way than sharing your journey with others through a blog. I am big fan of your blog. You have everything disclosed on your website from your net-worth to your targeted retirement date. Do you fear the social implications that come with such disclosures? What does your employer / boss / friends think about your goals?
My employer and friends don’t know about my blog. It’s completely anonymous. I like it that way, though. I can truly write what I want without the fear of anyone judging me.
I love the way you have defined your goals and timelines in your blog. I find it hard to do it. You have put in a lot of assumptions in order to reach the required target of $600,000. Because majority of your money would be in index funds, what if a significant market crash brings your portfolio down in the year 5. How would you tackle that?
That’s a great question. I think I would tackle that by postponing my retirement date. Even if I can retire in 4 years, it doesn’t mean that I must. Maybe I can work part time so that I cover my monthly expenses? And then let the bear market ride on its own, so that I won’t have to withdraw anything from my index funds. We’ll see. What I do know is that I can always work one more year if necessary.
I like the practical approach you have taken to save. I agree that saving is more important than movement in the markets. We have seen that your rate of savings is north of 70% in most months. How do you manage the urge to not spend? How did you align your family with your goals?
The reason that I am so good with delaying purchases, is that I visualize how much the money could grow if I instead put them to work in the stock market. Instead of spending $100 on expensive drinks one night out, that $100 could be worth $1,984 thirty years later.
Damn it, that’s almost a 20-bagger!
Think of that the next time you want to buy something. If you knew that your money would be worth 20 times as much in thirty years, would you still buy that iPhone 11 for $1K?
Well, this is my way of thinking. I’m always questioning purchases, and because of that I think I have an big advantage in the search for financial independence.
My economy is separate from my family. My savings rate of approx. 70% and my goal of $600,000 is for me only. My fiancée is saving approx. 40%, which I think is quite good. She wants to work and gets energy by doing it. The path to financial independence is so far just for me.
I’ve written about it here: My Key Lessons For Reaching A $200K Net Worth
That’s a great post. I agree that achieving financial independence and quitting your job are mutually exclusive. Having money in the bank is more important. On that note, why do you think we earn money? What is your opinion about money?
Can’t come up with a better answer than this from Naval Ravikant: “Money is how we transfer wealth. Money is social credits. It is the ability to have credits and debits of other people’s time.”
Money is necessary to survive. With money you can potentially buy back your freedom by saving and investing over a long time. When your investments pay you more every year than you manage to spend, you’re financially free. I think about money a lot, because I want to buy back my freedom. So that I can focus on the work I want to do for myself. Not work when my employer demands me to do.
I always get interesting answers for the previous question. I have always struggled explaining the concept of financial freedom to those unaware. How would you explain financial freedom to a spendthrift and convince him to begin this journey?
I would start by showing them a visual compound interest calculator. Showing them that saving $100/month helps. After 30 years you got $226,000. That’s amazing if you think about it. Spendthrifts will probably argue that they need money now, not in 30 years. But I feel $100/month is possible to save for most people.
Starting to save and invest is more important that the quantum of savings. It builds discipline. On that note, on to the last and my most favourite question.
Name one of each – the best book you’ve read and a blog you love to read
- Best financial independence book: “Your Money Or Your Life” by Vicki Robin This book made me realize that financial independence is possible if you save and invest every month. The book also taught me to lower my spending and think about the environment. A must read in my eyes!
- Best blog: Everything written by Morgan Housel in The Motley Fool days Thanks for informing me about this goldmine, Niraj!