- I'm gonna guess that you're one of three people.
Number one, you absolutely love your job.
Number two, you don't love your job, but you can tolerate it
or number three, you really don't like what you do for work.
Luckily, no matter which one of these categories you fall
into, financial independence is going
to be perfect for you and I'll show you why.
In this video, we're gonna go through where to start
with financial independence from the perspective of someone
who is in the thick of it
and currently working through the process.
Hey, I'm Jarrad with an A, and on this channel we talk
about all things personal finance, investing,
and of course financial independence.
Even though they fall under the same umbrella,
financial independence and early retirement
are completely different, but kind of the same.
It's like you and I driving to the same location
in Charlotte, North Carolina, but taking different routes.
We're both going to get to Charlotte, but one of us prefers
to do a little sightseeing along the way.
Financial independence is where you're
in a financial position to be able to choose whether
or not you want to continue working.
Another way to look at it is that you have enough money
to be able to quit your current job
to take a pay cut working at a different position
that sounds a little bit more enjoyable to you.
You basically have F you money, but still choose
to continue doing work that brings in some sort of money
before traditional retirement age.
Early retirement is where you have enough money to be able
to say, F this, I quit, and completely leave the workforce
before the normal retirement age.
Keep in mind that just because you leave work
doesn't mean you can't hop back into some sort
of income-producing job.
At that point, you're back
in the financial independence boat.
I honestly think that everyone ends up at the destination
of financial independence because you can only do nothing
for so long.
That sounds like it would get extremely boring
at some point in time.
This is why I mainly focus on talking
about pursuing financial independence
as opposed to early retirement
because I think it's a better fit for everyone.
If I asked how much you're gonna enjoy your job in 10 years,
then what would you tell me?
Unless you have a crystal ball, there's a 50% chance
that you're gonna be wrong.
The more amount of time that we add to this equation,
the less certain you can actually be.
That's exactly why everyone
should be pursuing financial independence.
Thinking optimistically, maybe we get
that far down the line, you've been pursuing FI,
and you absolutely love what you're doing for work.
Great, then keep doing it.
Not only are you gonna be happy with your job,
but you're also going to have a butt load of money set aside
for when you'll eventually retire or get burnt out
from the work that you're doing.
If you get that far down the line and you hate what you do,
then you just put yourself in a position to be able
to leave this job and do something else.
There might even come a time where you hit an age
that you're forced out of your job.
Look, we can all bury our heads in the sand
and pretend that age discrimination doesn't exist
in the workplace, but we all know that it does.
The studies are out there showing
that this causes significant financial damage.
56% of workers over the age
of 50 lost their jobs involuntarily.
Now, if those workers had been pursuing
financial independence, then I doubt
that this would be as big of a concern.
There are zero downsides
with pursuing financial independence.
You're better erring on the side of caution
and assuming that you're not going to like your job
at some arbitrary point in the future.
I always say this because it's so important to remember.
When you choose the path to financial independence,
you're immediately giving yourself options.
It's like hedging your bets against the unknown future
that's always looming ahead of us all.
If you haven't done it already and you're getting some value
from this video, please Hulk smash that thumbs up button.
Something you should do at the very beginning is figure out
what's actually important to you.
For a lot of people pursuing financial independence,
it's more time.
That's one thing that's more valuable than money
because we can never get it back.
If you could free up an extra 11 plus hours a day,
then what would you do with that time?
Because if you think about it, even if you work
a nine hour job per day Monday through Friday,
you're still spending way more than nine hours per day
on something that's related to your job.
Let's do the math.
Nine hours at work, one hour round trip commute,
and at least an hour from the time that you wake up
to the time that you hop in your car,
and that's being pretty optimistic.
It's probably more than that.
Now, if you spend any additional hours than what I mentioned
then that is cutting into your free time for that day.
If we take into account 7.5 hours of sleep per day,
then that gives you about 5.5 to six hours
of free time every single day, but it probably feels
like a lot less than that because we all waste little bits
of time here and there.
There's a concept called 100 blocks
by a blog called Wait But Why that does a really good job
at helping you visualize your time.
Each of these 100 blocks represents your available time
within a 24-hour period, measured in 10-minute increments.
It's already removed the seven hours we're assuming
that you'd be sleeping, so this is a good representation
of the true available hours that you have to do things.
It ends up coming out to about 16.5 hours
of free time in your day.
I went ahead and highlighted the 11 hours that you need
to set aside for work-related things if you were only
at work nine hours per day.
Now keep in mind, the more hours you spend at your job
or the more time you have to spend commuting to
and from work, the more it's going
to eat away at these uncolored boxes.
If everything goes perfectly, then you're essentially left
with about 5.5 hours of free time everyday to do things
like run errands, spend time with the family, work out,
take the kids to whatever practices they need to be at,
eat, and whatever else is going on in your life.
So you need to ask yourself, is the time you'll free up
by being financially independent more important to you
than buying a more expensive car than you actually need,
a pricier home than you can actually afford,
or anything else you spend money on to keep up
with your friends, neighbors, and coworkers?
When you pursue financial independence,
you're basically saving and investing money today
to get back your future time and freedom.
Think of it like taking your future 100 blocks
and being able to erase all of those red-colored ones.
Know you can't unshade them today since you're building
up your financial independence war chest but that's alright.
Since you're doing the work today, you're guaranteeing
that future outcome, but to get there,
you need to understand the difference
between a dollar invested and a dollar spent.
Now, I'm not gonna be the guy who hops up on his soapbox
and tells you to never spend money on anything at all.
Instead, I'm gonna take a more middle of the road approach
with this one because we're all adults here
and I am definitely not your dad.
What I suggest is being a little bit more intentional
with the money leaving your bank account
to go in the hands of other people.
If you want to spend a few $1,000 to go
on vacation this year, then go for it if that's something
that's very important to you, but if you do that,
then you're going to have to trade off something else
of equal value that you'd normally spend money on
so that you can keep up with the amount that you need
to invest every year or if you don't want
to trade off another purchase this year, then you're going
to have to trade off pushing out your financial independence
date just a little but further.
This essentially means that you're going to have
to trade off your freedom all
because a dollar invested today is worth more
than a dollar spent today.
Yes, that vacation is only gonna cost you $2,000 to go on,
but if it was earmarked for FI and instead invested,
then in 20 years it would be worth a little under $8,000.
If we'd like to put that $8,000 into perspective
just a little bit more, then if you only need $2,000
per month to live on once you're financially independent,
then you're essentially giving up four months of freedom
for a one week long vacation.
Once again, I'm not saying you shouldn't take that vacation,
but it's gonna be up to you
to weigh the costs versus the benefits.
Compromise is going to be huge on your path
to financial independence.
It's probably one of the biggest reasons
that most people aren't interested
in pursuing this lifestyle and that's perfectly fine
because it's not for everyone.
If you are someone who sees those types of things
as very important, then a compromise might be to take one
of those $2,000 vacations, but only allow yourself
to do it every three or so years.
You could also choose to take cheaper trips
like going camping to still get your fix
of getting out of the house without destroying your chances
of ever becoming financially free.
I like to call this structured spending.
You're giving yourself the opportunity
to enjoy something like that by spending money,
but you're building some intentionality around it.
If that thing that's important
to you doesn't have a huge price tag like a $2,000 vacation,
then just build some structure around that spending.
I do this with the money that I spend every month
on eating out or what I would consider cheat meals.
The money I set aside for this is $80.
Sometimes I don't even use it all because that's just
how it plays out over the month, but the amount I'm giving
up by allowing myself to do this is, wait for it,
$39,000 over 20 years since I'm choosing to spend
that money as opposed to investing it.
If my spending everywhere else wasn't as locked in as it is,
then I probably wouldn't feel as good about this.
Even thinking about it now and losing that $39,000
is a little tough to swallow, but it's a choice
that I'm comfortable with since I'm winning in the majority
of my money goals everywhere else in my life.
The type of financial independence that you want is going
to be super important to know going into the full thing.
Who the heck would've thought that there were
that many different kinds of financial independence?
But just so you know, there is,
and they each have different ways
of looking at the whole process.
At a basic level though, they're pretty much the same thing.
Where they differ is with how much money each one needs
to live a particular lifestyle,
what they're doing once they're financially independent,
and minor adjustments that go into getting there.
The four basic types are Lean FIRE, Barista FIRE,
Normal FIRE, and Fat FIRE.
Technically there's a fifth one called Coasting FIRE,
but I haven't covered that one on this channel yet.
If you want to learn more about each one,
then I created a whole video where I break down each one
in detail just for you.
Link to that video is down in the description
or somewhere above my head.
Looking at both ends of the spectrum,
Lean FIRE is going to be the one where you plan
on living with very, very little money after leaving work.
To some, this sounds amazing
since they're just not gonna need much to live on,
but to someone like me, I'm just not a huge fan.
On the opposite end, we have our Fat FIRE people.
Now, this group wants to be able
to live lavishly once they leave work.
They want to be able to live
in an expensive part of the country
and possibly take multiple vacations per year.
In their eyes, having a lot of restrictions on the money
that they spend sounds absolutely horrible.
For someone like me, this lifestyle might seem
like it's a little too much for my taste.
Disparities like these is exactly
why there's a few different types of financial independence
which makes me happy since neither of them appeal
to someone like me who is somewhere in the middle.
Thinking about how you'd like
to grow your money is gonna be a way
for you to build out a nice timeline for yourself.
This is gonna be different for everyone
since not all options sound appealing to everyone.
I know some people who are strictly using
real estate investing for this and aren't touching anything
that has to do with the stock market.
I also know some people who are only using the stock market
to become financially independent, and then there's people
like me who are doing a little bit of everything
since I'm just a fricking weirdo like that.
To help you think through some of these paths
that you can take, I made a whole video
where I break down five different ways
to grow a $1,000,000 portfolio.
Link to that video is in the description
or above my head somewhere as well.
This video took me a ton of work since I used just
about every kind of investment combination
that you can think of and crunched all of the numbers just
to save you a ton of work.
It's a great guide to get you thinking about
which strategy that you'd want to use.
Make sure to Hulk smash that thumbs up button.
Check out these financial independence videos
to your left next and also check out the description
of this video for more resources and playlists
to help you out with all of your personal finance
and investing needs.
I'll see you in the next one, friends, adios.