Financial Independence? I thought I was supposed to be concerned with retirement?

Retirement. Yes everyone is concerned with saving for retirement. You graduate from high school or college and immediately...

"You need to save for your retirement!"

"Join your 401k to get the company match!"

"Start and IRA and max it out as soon as possible!"

What the hell does it all mean and why should I even care? Well you should. But lets change the way we think about it and call it something else.

Financial Independence.

It is much more attainable, at any age and is different for every person.

Retirement. It sounds so far away, so hard to grasp, so life-altering. Let's take the mystery and confusion out of it and just call it financial independence. There really is not much of difference only once you are financial independent you can choose what you want to do, continue to work or not work, continue to live in your current location or move, you can be any age, you can have children or not, they can be old or young.  Financial independence just means your money can pay your bills for you, not your paycheck.

So ok, my money pays for my bills, but how? Let's start with a concept, its call interest. Here is an official definition of interest:

"The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal."

Say what? In more concise language, you lend your money to someone, they pay you money to borrow it, and then you eventually get your original sum back.

Right now if you have a car payment or a mortgage you are paying someone else interest. The goal is for people to pay you interest. Most people think that over your lifetime, you save a pile of money and eventually retire and spend that said pile of money. You can do that, but there is a better way. The better way is to save a pile of money, have that pile of money generate more money (interest) and only spend the interest thus keeping the pile in tact, and hopefully making it grow.


So how do you get to that? These four steps will get you there.

1. Make a budget and revise it often until you live with it and keep it.
2. Pay off your debts
3. Save money, collect interest, reinvest interest
4. Achieve Financial Independence. Or in other words, when the pile gets large enough you can now live off the interest or keep reinvesting it and growing your pile larger.

I have obviously simplified it very much. Each of these steps involves a lot but we are going to talk about each one individually in future posts. Until then, stay smart ladies (and gentlemen if you are reading).