What is Financial Independence

"You're never wealthier than when you have a job in high school and live at home." I used to say that to any young person who would listen and although that's not quite right, there was something to it in the early/mid 80's when I was in high school. There now might be more opportunity on this front thanks to the internet. Making a couple of hundred dollars/wk or more at that age lets you buy some things and do some stuff. Even if not true financial independence it is a taste of independence.

Your 20's are a time to learn about yourself, learn about your chosen career (whether you need to change careers) and when you start to build the foundation of your life. As you figure these things out, you are paying your dues. Don't be afraid or discouraged to spend time this way. This is where you start to learn the benefits of playing the long game. Taking ten years to build a solid foundation for living then next 60 years is a great investment in yourself. Make that investment.

Up above I mentioned the possibility of realizing you've chosen the wrong career or maybe the wrong part of the right industry (this happened to me, I was in the wrong part of the financial industry). If you realize you need/want to change jobs, it will obviously be easier for you to do if you've set aside a few months worth of expenses with the alternative being you stay at the job you hate until you find a new job. That money you've accumulated is optionality to quit right now if you want to.

What if instead of wanting to quit, you get laid off? I got laid off from a trading desk at 35. Getting laid off turned out to be the best thing to ever happen to me professionally but that is a story for a different day. If your hand was forced out of a job, regardless of the circumstance, how much trouble would you be in? Having built up some sort of savings or warchest is your resiliency against the adverse circumstance of an unexpected lay off. It is also your optionality against not having to take a job you'd hate doing but that you have to do because you're desperate. Never being financially desperate might be part of the definition of financially independent.

This is a game changing habit. I'm 33 years into being an adult and been doing this almost the entire time. Drive your same car as long as you can, be undermortgaged and don't trade up. Naval Ravikant said something along the lines of people who live below their means having a freedom that others can't imagine. I make this specific point all the time. It is a huge part of the foundation I refer to above.

This is a next step or maybe a next level of your independence. Read Mark Baker on Twitter who can articulate this better than me but this sort of is about being self employed. You get to the point where you cannot work for a boss, at a company where other people set your schedule. Baker calls this slavery which it pretty much is with respect to independence. Yes you get paid but you surrender your independence. The trade off might be less money but far more independence. If you can make independence the priority over higher pay, you are truly free.

Have money in taxable accounts, qualified (traditional) IRAs/401ks, Roth accounts and an HSA. This is looking down the road a bit maybe but this gives some optionality all throughout your life.

Where we are talking about financial independence, it is going to be much harder to be financially independent if you're shelling out $2000/mo on prescriptions. Insurance is expensive enough without the expense of prescriptions. Being 40 and being able to get it done physically is optionality and resilience. Being 50 and being able to get it done physically is optionality and resilience. Being 56 and being able to get it done physically is optionality and resilience and this will be true at older ages too. Retain the ability to walk, run, jump and lift heavy things.

If you are capable of those physical things, then you are able to do whatever you want which is the literal definition of being independent.

Volunteering actively is how I achieve this. I became an EMT at 45, I've accumulated a lot of training related to firefighting and other emergency services. I have built the opportunity to monetize my hobby if I ever need that income. I love my primary job and can't envision a scenario where I am not still managing money but the future is unknown (see number 10 below).

A point I have been making for years is to understand what threatens your lifestyle and mitigate them as soon as possible. When I got laid off, it was 2001, I knew a year and half before that it would happen eventually. The company was making clear and obvious mistakes with the internet bubble and a layoff was very probable. I built a war chest by not contributing to my 401k, putting it in the bank instead and not taking vacation days because they would pay out accrued vacation upon letting me go. Assess all relevant aspects of your life to isolate and then mitigate the threats.

Back to a couple of points higher up on the list. Play the long game and add to your skills. I have 19 years in at the fire deparment (this is my 20th fire season), many years of building a skillset far different than my day job. If I ever even need this Plan B, it might not be for a full 25 years after I started volunteering. Very long game.

Set your own schedule

Not worrying about money

Physically capable of doing what you want

Very few things that could disrupt your life

Time to do the things you want to do