Welcome back to your FI 5-day challenge! So you’ve already gotten started and you figured out your ‘Why of FI.’
We called it your North Star. Why you want to step off what is the traditional path of spending every single dollar you have, or maybe even going into debt?
So now it is time to talk about what FI is.
FI is having enough money saved up so that working becomes actually optional.
You no longer NEED to work to earn income for the rest of your life. Many of us CHOOSE to work after financial independence, but the key thing is, we choose to do so.
It’s important to note that FI is reachable by normal people like you and me.
And that to understand that FI is not a binary yes or no, zero or one thing.
In fact, the benefits of starting on the path to financial independence start from day one, with mindset changes.
Which means you are already well on your way, since this is Day 2 of the Challenge and Day 2 of your Path to FI!
FI is all about making small changes, about casting these little votes in favor of yourself.
That first time that you save a little bit of money and you realize not only is your life not worse off, it’s a lot better because nothing essentially changed and now you have some extra money.
And you start adding a couple more of those little changes and they turn into 10, 20, 50, a hundred tiny little changes.
Very little of this is some cataclysmic change that is going to upend your entire life. It’s a series of small changes.
These little changes compound, as do the money you are able to save towards Financial Independence.
Here’s the dirty little secret about retirement. Most experts and retirement calculators have it backwards because they are starting from the wrong place.
You don’t need to replace your entire current income because your savings is a chunk of that money.
Realistically, a more achievable number for many of us is to replace our expenses. That is what we need to cover to support our work-optional lives in retirement or FI or whatever you choose to call it.
We call this number the Financial Independence Number.
Things change obviously, but the easiest way to begin is to start with today’s expenses, and then very simply try to understand what are you spending in an entire calendar year.
Once you get that figure, you multiply it by 25.
If your annual expenses are $60,000, then you just very simply multiply that by 25, and you get your financial independence number of $1.5 million.
Some people in the FI community who have dependents then take an extra step. They buy a term life insurance policy that would cover that FI number, so that they can know their loved ones can get to FI even without them. To get a sense of what FI for your dependents might cost, use the life insurance calculator and compare quotes below in the resources section.
So again, thank you for being here for ChooseFI’s 5 day challenge, and most importantly, thank you for taking action. This is the critical piece of becoming financially independent.
Get An Estimate: Use your FI number in the Coverage Amount slider in the life insurance calculator below to compare quotes and get an estimate of what you can save on a policy.
Our community helps people discover and accelerate their path to Financial Independence with the goal of earning more, spending less, and enjoying the journey.