I spend hours sifting through unorganized and random posts on blogs, so I wanted to try to create something a little more structured and user-friendly here. If you’re new to FI, this page is meant to be a roadmap of some of the more popular topics covered by this blog, and I’ll try to keep it continually updated as the blog expands. Once you’ve made your way through this, be sure to check out some of my other blog posts, and let me know what you’d like to see in the future.
I currently work as a lawyer in Los Angeles, and for the last few years, I have focused on building an investment portfolio that would allow me to be financially independent. Although I enjoy my job, the long hours, stress, and total commitment it requires makes me think I won’t enjoy it forever…
I entered the workforce after graduating law school in 2013, and I had no idea what to do with a consistent income stream. Other recent graduates were buying new cars to reward themselves for their success, but I thought paying off my student loans would be a better idea. I took a deep-dive into financial planning, budgeting, and investment strategies, and found a passion for making my money work towards my goals, instead of mindlessly consuming like most of the world. After pouring nearly every penny I made into my student loans, I finally paid them off! I got married in 2015, and now my wonderfully supportive wife and I are saving towards and investing in the life we want!
How Could I Ever Reach Financial Independence?
The path to financial independence seems daunting, but it’s really not too complicated. I believe financial independence is attainable for anyone who is willing to be disciplined with their saving and investing strategies. Pure wealth building never appealed to me, because there was no end-goal. But after realizing that an investment could supplement or replace my income from work, the whole game changed. I realized that by creating an investment portfolio, and withdrawing a small portion of that portfolio each year, I could be financially independent.
How much can you withdraw from a portfolio? Just remember the 4% rule, which states that you can withdraw approximately 4% of a well-diversified portfolio per year, without depleting your investments over time because of the gains your portfolio makes over that same period. That means that once your portfolio reaches about 25-30 times your yearly spending, you should be able to live off of that portfolio for the rest of your life!
Does it seem impossible to grow a portfolio of that size? Reaching FI definitely requires discipline and consistency, but it is very possible. If you’re willing to make some adjustments to the average “consumer mentality,” you could reach financial independence in as little as 7-10 years. And trust me, these “sacrifices” don’t look so bad when you can spend the rest of your life free from the stress of, and dependence on, your 9-5 job. I find working toward financial independence to be enjoyable and rewarding, especially since the end result is so worthwhile.
Road Map to Financial Independence
I’ve gathered what I think are some of the most fundamental steps to achieving FI. These steps are like financial commandments—they cover some basic and very important topics, but are by no means comprehensive. If you’re new to FI, take note of these principles, and you’ll be well on your way to achieving FI.
- Before you start anything else, find a way to track your progress. It’s helpful to think about and analyze your finances the way that corporations do. While you don’t need to go out and become an accountant, a few tools are very helpful.
- I use Personal Capital because it’s easy to link all my accounts, and it does all the difficult math for me.
- I also budget. This allows you to forecast your spending and create spending and saving goals for yourself. (Look for some posts on budgeting soon!)
- Get rid of bad debt. I’m talking primarily about credit card debt and student loans here. If you have credit card debt that you carry over from month-to-month, then your first step towards FI is very simple—destroy that debt.
- Focus on buying assets rather than liabilities. This is a two-edged sword, because it allows you to both grow your portfolio, and decrease your yearly spending, which means you can reach financial independence much sooner.
- Invest, invest, invest! This is the fun part—the part where you get to watch your portfolio grow and bring you closer to early retirement and financial security.
- Here are some articles about my basic investing strategy:
- I plan on reviewing a number of alternative investment platforms, and tracking my performance with each.
- I also plan to invest in income-generating real estate soon, so stay tuned!