My Third Principle: Be Financially Independent

A few years ago I discovered the FIRE movement - Financial Independence / Retire Early. The idea of financial independence immediately appealed to me. I liked the idea of living my life in a way that meant I would work a job because I want to, not because I have to. Implementing the principles behind financial independence is one of the key reasons I was even able to start my own business.

In a nutshell, the idea behind FIRE is to figure out how much money you spend annually, then save up enough money to cover your spending for however many years you will be in retirement.  Once you've saved up enough money you're done - you can retire without needing to work again. (Suffice it to say that I've glossed over a lot of details in this explanation. It's not quite as simple as I've described here but it's also not that much more complicated. If you are interested in the details about FIRE I recommend checking out the Mr Money Mustache blog.)

Now to be clear, I'm nowhere near the point where I can retire forever without earning any more money. But I do have enough saved up that I can operate my business for some period of time without needing to make money. This has allowed me to experiment with projects like writing, creating video games, and starting my coaching program. Not all of these projects will yield a return instantly but that's OK. Financial independence gives me the freedom to try different things without being beholden to some outside investor or debt holder.

There are a few key concepts to financial independence that I apply to my business:

Spend money deliberately - Many studies have shown that lottery winners, a year after winning the lottery, are usually about as happy as they were before. Other studies have shown that once you hit a certain threshold of income, more money doesn't necessarily correspond to more happiness. What's the lesson to take away from that? Spending more money doesn't necessarily correspond with being happier - which means you should be deliberate about where you put your money. Before you make a purchase spend some time thinking about why you want to buy this thing and whether it will make you happy in the long run. That's not to say you should never spend money. I don't strictly need a rice cooker, but I eat rice every week and a rice cooker was an inexpensive investment in a way to eat better.

Know where you are spending money - This is a very basic concept but one that took me a long time to turn into a regular habit. It's easy to get lost in a cycle of saying "Oh, this is only $10, that's not that much so I'll buy it." Those small purchases can add up over time though so it's important to take a step back every so often and review where your money is going. I personally use Mint to aggregate and track my accounts, but there are other tools out there like YNAB.

Diversify your income - Right now my business's only source of revenue is my coaching program. That is not my plan long-term though. I'm constantly thinking of new tools or programs that would be useful to people that are trying to get over burnout and that would allow me to run my business in a sustainable way. Diversification is a good idea for everyone even if you are already in a full time job. Many people have started side hustles as ways to increase your income or to pivot into a new area of interest.

What about the other half of the FIRE movement - retire early? Personally I don't think I would ever be satisfied with retirement in a traditional sense. I have heard many stories of people who spend their whole lives working, retire, spend a few months relaxing, then get restless because they are bored. I’m sure at some point I will want to stop working. But for now I want to help people and be useful to society. And if I’m going to be useful to society I might as well try to get paid for it.

What do you think about financial independence? Are you trying to retire early? Feel free to email me.