I have been an avid reader of personal finance for over 35 years. Maybe because of my business finance background or maybe it is something else, but it just seems to resonate with me.
I have devoured books and podcasts about financial independence because I wanted to have the freedom to do the work I enjoy on my time.
After my triplet girls were born, I became focused on this goal. A friend of mine told me that in a “blink of an eye” our girls would be grown and away from home. That seemed crazy after swaddling them in their baby blankets, but wow…. was my friend right! It has gone fast, but I took his advice and focused on financial independence.
The equation I arrived at to define this freedom is: “Financial freedom” = [passive income + earned income from work I love to do] > my living expenses.
If I solved this equation, then the time freedom that I wanted would be at hand. I focused on three factors to solve this equation.
- Building passive income from investments
- Maintain a reasonable standard of living
- Earn money doing work that I enjoyed
Generate passive income. For me this means investments that generate dividends, interest, or capital gains from stocks and bonds. I am comfortable with investing in the stock market using a simple approach with index mutual fund investments. Others have invested in real estate with collecting rents or other assets that generate income without the need for labor hours. Whatever works best for you and your risk profile is the right choice. The idea is to create income streams that don’t require your labor effort (or at least a minimal amount).
Keep your living costs reasonable. It was so easy for me and my family to inflate our lifestyle when the kids came along. My wife and I worked hard for many years and felt the desire to have certain things that we could afford, and were “nice to have”, but not “gotta have.” Being able to defer some spending that really was not going to make any difference to us in the long run made sense. We lived below our means, but never felt deprived. Simple family experiences were cherished versus the nice electronic gadgets that would not buy me my freedom.
Earn money doing work you enjoy. So often I would hear friends or colleagues complain about their jobs, but they would not change. Why? Not always sure, but some may have felt stuck given lifestyle choices or fear of the unknown at the next business. I didn’t always enjoy my work at times, but my attitude was one that I always took away some learning. How could each new job or position help me get closer to financial independence and at the same time enjoy the journey?
Financial independence or freedom, whichever rings true to you, is both a mindset and a math equation. If I had the right mindset and I understood the math behind it, then the time freedom with my family would be solved. Are you ready for take your time back? Let me know if I can help you.
Cheers to your freedom!
Mike