This is a guest post from Kirin Nguyen. Let me know if you would like to guest post on Reach Financial Independence
KIRIN NGUYEN IS A FINANCE BLOGGER AIMING TO HELP OTHERS BETTER MANAGE, SAVE, AND INVEST MONEY. FINANCES ARE A SUBJECT THAT IS LACKING IN TODAY’S EDUCATION SYSTEM; HE HOPES TO BE SOMEONE WHO CAN HELP TEACH OTHERS.
Find Kirin on his blog
What Does It Mean To Be Financially Independent?
What does it mean to be financially independent? Some people will argue that financial independence means to be so filthy-stinking rich that you don’t have to work a day in your life. Do you think that’s true? I don’t.
To me, being financially independent means to have “enough” money so my assets will generate me enough income to live comfortably. This financial destination was one that I couldn’t believe; retiring before age 65? Living a fabulous life without working? In what world does this happen?!
I’ll tell you– It’s the world where you don’t become brainwashed by the education system. Like other millennials, I was taught that going to college, getting a degree, and working my life away at a 9 to 5 job up until age 65 was the only way to life.
I HATED MY ACCOUNTING JOB.
Every night I would fall asleep not wanting to wake up and every morning my legs would tremble before leaving the house. I was so engulfed in depression that I decided to quit my job and dropped out of school.
Fast forward a couple of years and now I am leading a team in the grocery industry and writing a finance blog on the side! And you know what? I am loving every minute of it. I am living a life where I am endlessly aiming to achieve and accomplish more by the day. Although I have my own means of success for every aspect of my life, my financial goal will be to achieve financial independence!
1. Find Your Passion and Do What Makes You Happy
Unless you were born in a rich family, you’re most likely going to have to work in order to achieve financial independence. Find a job that you are passionate about and one that drives your motivation.
If you’re going to be spending 40 hours a week at a job then you might as well spend it at a place that you enjoy. When you are passionate about what you do, the motivation and drive naturally form. Your passion should make you hungry and desperate for more.
What can I do to become better? What can I do to be one step ahead than who I was yesterday?
Why do I think this is the first step of financial independence? The reason is that achieving financial independence will be a long journey. Sticking to a job that you hate will make the journey 10x longer and 100x more agonizing. The one month that I was employed at my accounting job, I felt like I was there for eternity!
What happened when I left? I went back to my old job as a grocery clerk. Yes, stocking shelves. The pay was drastically less than what I was getting paid as an entry-level accountant, but you know what? I would much rather work at a job that I enjoyed and make less than to work in a place that I hated for more money.
Eventually, my work ethic and drive were noticed and over the years I was climbing the ranks faster than most of the senior workers ever did.
2. Calculate how much you need to reach Financial Independence
The next step would be to figure out how much you need to have in order to be financially independent. This step is important because you should have a dollar figure that you want to aim for before starting the journey.
For this calculation, you will need 2 numbers
- Your annual expenses (how much your lifestyle is costing you each year)
- Multiply it by 25
Your annual expense multiplied by 25 will give you the amount that you need to save in order to have a “safe withdrawal rate” of 4% annually.
3. Living Below Your Means While Earning More
When I was younger, I wanted a Rolex watch and a fancy car. Did I need it? No. I just wanted it. Who doesn’t want all the nice and luxurious stuff?
Well, it wasn’t until I actually started working for my money that I learned that those materialistic things don’t matter. Sure, a Rolex is nice, but with money like that, I can do a lot. I can travel, learn, or invest. The possibilities that I could do with that money can be used for so much better.
There are 2 ways to build your funds to achieve financial independence.
- Increase your income
- Decrease your expenses
There’s actually a 3rd way and that is to do the combination of both; earning more while spending less!
Financial independence is a journey that will require a lot of effort and hustling. Work multiple jobs, start a business or have a side-hustle. Keep in mind that the more lavish lifestyle that you are expecting to live, the more funds you will need to save. Someone who is living more frugally will require less to achieve financial independence than someone who wants to retire in a mansion with 30 washrooms.
4. Learn How To Invest
Do you know what subject I never learned in school? How to invest money. To me, it seemed like school was always telling me about paying money; like for tuition, transit passes, textbooks, etc, but why not how to save, make, and invest money?
Learning how to invest is an important part of financial independence because there are only so many hours that you can work in a day. If you’re lucky enough to work in a job where your pay is not solely correlated to the number of hours that you work then that’s fine, but many of us work a typical job where we get paid by the hour.
With 24 hours in a day and 8 hours for sleeping, there’s only so much time that you can use to earn money without compromising your health. You worked hard for your money and now it’s time to learn how to invest it. At this step, you got money, now it’s time to use your money to make more money!
This wraps up my 4 step journey to achieve financial independence! Let me know what you think down in the comment section below!