What Financial Independence Means to Me

About a year ago, I became fascinated with the idea of early retirement. There is a small group of people that I discovered through blogs and podcasts from whom I learned a great deal. Most people in the mainstream have never even considered early retirement an option and neither had I. It seems the norm to spend almost all of what you make while only saving a very small amount for retirement, or financial independence, as I prefer to call it and will refer to it from this point forward. The reason that financial independence is a more fitting term is because I don’t plan to “retire” once I reach financial independence, but I do plan to be financially able to pursue whatever I may choose. My personal financial plan leads me to this ultimate goal in approximately 5 years. It could be more, it could be less depending on what life has in store, but overall I am confident that I am heading in the right direction.

I believe truly learning yourself and what makes you happy is a never ending process. I am still very early in this process, but it is already readily evident to me that what I am interested in today is likely not what I will be interested in ten years from now. This may not be the case for everyone, but for me I know this to be true. Although I love physical therapy at this point in my life, I want the freedom to go back to school or change careers in the future if that’s what I choose to do, without the fear of not being able to pay my bills. Also, I plan to have kids within the next five to ten years, and I want to be able to spend as much time as I choose with them. Even if you love what you do and you can’t imagine not doing that thing for the rest of your life, wouldn’t the freedom to take off when you needed to for life circumstances (family vacations, illness or death in the family, or whatever else life may have in store) be invaluable? So you’re thinking, yeah that sounds great, of course everyone wants that freedom, but how is that possible?

Financial independence comes down to one factor, and that is living below your means. It will never be possible to be financially independent before retirement age if you only save a small amount of your income. You could be the world’s best investor, but it is difficult to invest without capital. There are only two ways to live below your means: make more or spend less. For me, this was a big factor, but not the only factor, in choosing travel physical therapy. I am able to make more money than I would if I were to take a full time job somewhere. In addition to earning more, I also focus on spending less. Whitney and I split all of our expenses; we both have budgets and we do our best to stick to them. We strive to save as much of our income as possible.

Trying to save as much as possible while also still enjoying life can be a delicate balancing act, but we do a very good job of balancing each other out. I’m all for saving as much as possible, but that doesn’t mean I’m willing to sacrifice my happiness in the present in exchange for gaining early financial independence. I have always been a natural saver, but Whitney does a good job of keeping me in check and keeping me from being too frugal. We are lucky enough to be able to save a substantial amount without having to sacrifice much, if anything, that we want. We have had a number of exciting experiences thus far in our first year out of school, while still saving at least 75% of our paychecks each month. I understand that this isn’t feasible for everyone, but by choosing the paths that we did, this is possible for us. Regardless of your specific circumstances, there are definitely ways for everyone to take a look at your budget and begin saving more than you spend, while still having great experiences and enjoying the present.

One example of how we made sacrifices to be in our present situation is that we saved for 6 months right out of school in order to pay cash for both our camper and our truck, instead of going with costly financing. This meant that we had to sacrifice and find alternative housing for our first two contracts (living in an over the garage apartment at someone’s house we found on Craigslist), rather than jumping right into our plan of living on our own in the camper.  This decision definitely paid off, and now we are living out our dream plan.

To some, living in a camper itself may seem like quite a sacrifice, but we don’t see it that way at all. The camper allows us to avoid having to pack and move every time we finish a contract. Which is not only a hassle, but also a waste of time, which ultimately means a waste of money. The old saying “time is money” is true throughout life, but especially so when there is no such thing as paid time off. In addition, the camper gives us some consistency when moving. We may have to adjust to a new geographical location, new people, and a new work environment, but no matter where we go, our living area will be the same.

Other ways that we “sacrifice” to save money include eating in and cooking most nights of the week, packing lunch everyday, and making coffee at home. We still enjoy eating out once or twice per week, and if there’s some special treat we really want, yeah we can go ahead and buy it. It’s really not that big of a sacrifice if you just make it part of your lifestyle. I like to think of every dollar I spend on something in terms of how long I have to work to pay for that thing. For example, if you buy coffee every day before work at an average of $3 per coffee, times 5 days per week, times 52 weeks a year, over a 30 year career, you could have saved $23,400 in cash. If that same amount was being invested (i.e. in your 401k or IRA) at an average return of 7% per year (reasonable based on previous market returns) you would end up with just below $80,000 saved over a 30 year career. Based on the average individual income of approximately $30,000 per year gross income, that would mean an approximate additional three years of work to fund this daily habit after taking income taxes into account. Everyone has their own priorities, but to me this just doesn’t seem reasonable. You can take this same example and apply it to bigger purchases too, such as eating out daily, or even choosing a  more expensive car or house.

The point of this is that life is about perspective. What seems like a sacrifice to one individual is not at all to another. Make a list of the things in your life that are truly important to you, and then make a list of the top places in which you allocate your money. Do the things at the top of the lists match up? If not then that is an ideal place for reflection. Now look at the bottom of the list of things that are important to you. Could you allocate fewer resources to those “unimportant” things in order to reach “freedom” sooner? Again, time is money, and the more money you spend today the further you push financial freedom into your future and take the focus away from the things that are truly important to you. Is a new car and house what truly makes you happy, or is it a status symbol? Do you use all of the space in your house or apartment, or could you get a smaller space that is still accommodating while paying less? Is coffee at Starbucks and eating lunch out every day worth an extra few years working at the end of your career when you are ready to pursue other interests or spend more time with family?

Every day is a gift and there is always the possibility that there will be no tomorrow. But, if you are able to live a full life today and allocate your resources to the things that truly matter to you, while also saving a substantial amount for the future, then why not? To me this seems like common sense, but I know that it isn’t because I have met many people that can’t understand why I wouldn’t just buy things because I can afford them.

Financial independence to me means freedom. Freedom to do whatever I want, whenever I want. I may go back to school at that time; I may begin a new career; I may travel the world (frugally of course); or, I may continue working as a physical therapist, whether full-time, part-time, or PRN. But the point is, I will have that choice because of financial independence. I won’t be locked in to a 40+ hour work week. Whatever I choose to do when I reach financial independence, it will undoubtedly include: family, reading, learning, developing new skills, and making the world a better place to the best of my ability. This is a top priority in my life and I imagine that it will be for the foreseeable future. Thanks for reading. What are your thoughts on the subject?

Disclaimer: This is not meant to be specific financial advice, just illustration of the concepts that I choose to apply to my own life.

16 thoughts on “What Financial Independence Means to Me

  1. Hi Jared,
    I enjoyed reading your post and I’m glad that you have discovered what is important to you so early in life. I’m a CFP and try to help people focus on and prioritize what is most important to them, and develop a financial plan to get them there. This is even more critical for our generation as financial independence is more in our hands (saving and investing) compared to previous generations (defined benefit pensions). I could probably recommend some books or blogs about various financial planning topics that might be of interest. Let me know if you’re interested!

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  2. Jared,
    Glad to see your thriving on the road (literally) to financial independence! Its amazing that after 8 years of “higher education” the extent of my personal finance education consisted on one Siyufy lecture. Luckily a little motivation and some reading has set me on my path to financial independence with the long term goal of owning my own practice. Congratulations on starting the blog and hopefully this post will help inspire other young professionals to educate themselves and take advantage of the power of compounding interest while time is on their side. Looking forward to reading future posts. All the best.
    -Kevin

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    • Thanks, Kevin. Considering how important of a topic it is for long term happiness and success, it is a shame that so little focus is put on personal finance in school. I have had an unhealthy obsession with personal finance and investing over the past year and a half or so. Travel has been great and very lucrative so far. If you ever want any recommendations or advice about anything finance related, or just to discuss things, let me know. I will have quite a few posts coming soon, including a post of student loan repayment. If at least a few people learn something, I’ll be satisfied.

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  3. Great post! I am on a similar path, to free up my time to do what makes me content in my life. Money is a facilitator, you know that as much as I do. To see expenditure as a trade of your time is something I whole heartedly agree with. To spend all your income and bind yourself to a job you may or may not enjoy is the real sacrifice. It is a shame that this is not taught more readily but at least we know and can transform our lives into what we wish. I wish you well and look forward to following you on your journey.

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    • Thanks! To me, I have always viewed my expenditures in terms of time. In high school, if I knew that I would have to work 3 hours at the grocery store (a job I didn’t enjoy) in order to buy a CD, there was no way I was willing to make that trade. Until recently I thought everyone looked at things the same way. It is obvious to me now, that is not the case. I feel very sad for people that work at a job they hate and have no end in sight because of their financial inadequacies but this seems to be the norm. I’m glad you’re on the right path!

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  4. Hey Jared – this is great stuff! I really like how you hit on the point of delayed gratification. In order to be successful–financially or in other areas of life–that’s what it always comes down to. So when I read things, it either makes me think of a Seinfeld episode or a Research study. You know that’s how my brain works 🙂 So in this case I thought of a research study: the Marshmallow Test by Walter Mischel. This really sums up the benefit of delayed gratification…if we could go back in time to when you were a kid, I know that you would have not eaten the Marshmallow!

    For those not familiar with the test, there’s been some TED talks on it and other things written – but I think the first 3 minutes of this video is a good summary:

    Anyway, great job and looking forward to more of your posts!!!

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    • I think you’re giving me too much credit here. I was a chubby kid, the marshmallow wouldn’t stand a chance. Jokes aside, delayed gratification is an extremely important concept to grasp for everyone. As that study suggests, some develop an understanding of it much earlier than others but anyone can learn how important it is. “Sacrificing” now to be in a great position in the near future just doesn’t seem like much of a sacrifice to me.

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