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Finding Your Personal Financial Independence Sweet Spots (Hint: Everyone’s got at least one working for them already)
When I first started following the Financial Independence movement, everything seemed to be out of reach. We had high overhead costs from maintaining our waterfront home and, as Canadians, we paid high taxes on literally everything which caused a drain on our savings potential. I could not see how we would ever be able to retire early, and the thought of slogging it out until 60 was depressing.
Over time, I realized that there is no universal secret sauce to finding financial independence. It’s accessible and available to anyone, at any age, anywhere in the world. This is what makes it so empowering.
Most of the people I followed online or learned from had attributes in common that either came naturally or that they developed. The other reassuring aspect was that people from all kinds of backgrounds had achieved semi-retirement or work-optional status within a few years once they put a plan in place.
No matter where you are in your journey, you can make adjustments to your life to get to where you want:
- Track your spending: Personally, I go through phases where I track everything and phases where I don’t. Normally I track our spending when things are relatively stable and predictable. As well, since I already pay almost everything by credit card, it’s easier to track our spending since I can just download the online statement and create categories like restaurants/delivery, groceries, utilities, car, shopping, personal, and entertainment.
You might be wondering why I pay for everything by credit, and that’s because I pay off my credit card in full each month. As well, I use credit cards with good rewards – either travel or cash back.
I recommend tracking your spending for 3-4 months and then taking an average of your spending by category to see if there are any reductions you can make. You can also use various apps like Mint or GoodBudget. I’ve used both and liked them for different reasons.
In all cases, if you don’t know where your money is going, then you don’t have any control or agency. By knowing where your money is going, you can identify areas where you can make adjustments.
- Save while you’re young: There is a massive benefit to discovering FI or saving while you’re young. The longer you can benefit from compound interest, the better. When you’re younger, you can weather economic storms without panic. Finding ways to save in your 20s has a massive positive impact on your lifetime savings potential.
On the other hand, don’t be discouraged if you’re starting your FI journey late.
There are a ton of great strategies you can use to accelerate your savings. Our big break came when I was 43, and we were able to save enough money in 4.5 years to become work optional.
- Increase your savings rate: On the savings spectrum, there are so many ways you can make this work to your advantage. The first step for anyone starting their FIRE journey is to, of course, know what your savings rate is. If you’re doing the normal employer match program, you’re likely at 10% by default. However, for many FIRE enthusiasts, they’ve retired early by saving 50% or more of their earnings. This requires significant lifestyle changes, especially in the big-ticket expense items – accommodation, transportation, and earnings.
- Accommodation: There are so many hacks for accommodation. Depending on your current spending, you can rent out part of your home, downsize, or get a roommate. Where you live is also hugely important, so if you’re working remotely, could you move to a cheaper neighbourhood or country?
- Transportation: Could you sell your car and take public transport instead? Instead of two cars, could you go down to one?
- Earnings Potential: If your work performance is good, could you ask for a salary increase? Could you pursue a role with more responsibility and higher pay? Alternatively, could you work a side hustle? Have a yard sale? Rent out part of your home? Teach online?
- Work Remotely: Having a remote role naturally allows you to save more with little effort. Having worked remotely for nearly a decade, the best piece of advice I can offer is to automatically save everything you would have spent for in-office expenses (gas and transportation, restaurants/coffee shops, parking fees, corporate clothes).
Don’t succumb to lifestyle inflation which essentially means that as you earn more, you spend more.
Depending on where you live, working remotely can easily translate to $1,000 or more each month, which with the magic of compound interest, can support an early retirement date.
Similarly, calculate your commute time and re-allocate this to a side hustle project where you can earn additional money for savings. If you spend 30 minutes getting ready and 45 minutes each way commuting, then that equates to 2 hours daily that you can allocate to earning extra money. Online consulting, writing, or teaching can bring in additional money for savings.
Finally, if you are working remotely, could you move to a lower-cost area, thus further accelerating your savings? If you currently live in Toronto and you move to a smaller town, this could potentially save you another $1,000 or more in housing-related expenses.
- Work in tech: One trend I’ve noticed among the FIRE community is that many early retirees, including myself, worked in tech. Startups and tech generally offer high salaries, annual bonuses, stock options, and annual increments. As well, many are 100% remote which means you get that added savings boost. Even if you don’t have a background in tech, there are so many low-cost ways to retrain through Coursera, Udemy, or tech bootcamps etc. My husband, as one example, transitioned from oil and gas to web development by completing 18 online courses over a two-year time span.
From this list of five, how many do you have already in your favour? Are there any additional ones that you could work to your advantage?