How to be financially independent

The Money Engineer

There is a new trend around the world. In the olden days people worked throughout their lives in a single company. They would then get a pension once retired. This has since changed.

Many young people are now aiming for early financial independence. Thereafter they proceed to pursue things they are passionate about.

Financial independence means not having to ever work for money again. You only go to work because you love what you are doing. There are countless stories online of people who have retired between 30 to 40 years.

This new movement is commonly referred to as FIRE. Financially Independent, Retired Early.

But how much money do you need to reach financial independence and never have to worry about money again.

This question has been well researched and the common consensus is that you need 25 times your annual expenditure. So if you spend 12 million a year you need 300 million to reach financial independence. You would invest this money in a safe place like treasury bonds and would live off the interest for the rest of your life without ever having to work again. Imagine not having to work for money and being free to do whatever you want with your time.

This principle is usually referred to as the 4 percent rule. Basically you can withdrawal 4 percent of your investments without ever running out of money.

The way to achieve financial independence is to drastically downsize your lifestyle and ramp up your savings rate. A savings rate above 50 percent is recommended by FIRE practitioners. It usually takes about 10 years of intensive focus to reach FIRE. The time required depends on your income and savings rate as well.

So if you are interested in FIRE start saving a lot of money today!

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