So in some of my posts and youtube videos ive alluded to our long term goal which is to be financially independent. This is one of the big reason my family practices minimalism and frugality so I thought it was high time to discuss this formally and share with you all where we are at in this journey.
The average person probably isn’t really concious of what financial independence (Fi) is and even if they can work it out from the words themselves might think this is something only for the very rich to think about or in the realm of get rich quick schemes.
But no, financial independence is within reach of an awful lot of average people with average incomes. The key is it is a lifestyle that not only applies during the ‘getting there’ stage but continues for as long as one would like to remain financially independent- probably the rest of your life.
There are many people who are famous now for doing this and providing advice to get there. The favourite of mine of these is Mr Money Mustache. To sum up the theory of financial independence. You live well below your means by practicing frugality and meanwhile investing the savings most likely in the stock market. Then once you have savings which equal 25x the amt of money you have worked out you need to live in a year you can declare yourself financially independent. At that point you could retire early living on that amount. This relies on what is called the safe rate of withdrawal which is considered 4% which means in theory overall despite ups and downs in the share market you could withdraw 4% of your share portfolio to live on and the growth in the share market will offset this withdrawal so that you can continue living like this indefinitely.
Alternatively financial independence can just mean you can start being picky about the work you do for money. At this point your living expenses are covered so you can just do what you find meaningful and fun.
The downside for many people of this lifestyle is for the average person with only a moderate income it means signing up for a very low cost lifestyle basically for the forseeable future. If you are someone that likes new cars, lattes alot of travel and wearing fashionable clothing and don’t have a very high paying job you may not enjoy living the financial independence lifestyle. That being said it is about priorities. Alot of moderate earners have got to FI and prioritized travel and managed that on their living budget. But they probably aren’t travelling alot as well as spendimg alot of money on a lot of fancy things as well.
For my family we aren’t overally motivated by international travel. We already have experienced this and it didn’t really result in catching a ‘travel bug’, instead made us really value the country we already live in! Not saying we will never travel overseas again, but it won’t be a major focus for us.
We are also very happy living quite a frugal lifestyle. We don’t care about new cars, are happy buying most of our clothes and many other things 2nd hand and striving for a minimalist lifestyle has made us want for less anyway. We are happy to live like this indefinitely and instead get pleasure from creating things and learning things.
So where are we at and our long term goal?
Well we are very close to being debt free. We initially had the goal to buy our house in cash but in the end due to a change in first home saver bank accounts in Australia (they were closed down) we saw that it was going to make very little difference in morgage interest to us to to buy our place with a tiny morgage. That now will be paid off in about a month as will the rest of my student debt. That will be around 1 year after buying our house which is on a 20 acre property (but we were saving for several years before this).
So we are obviously far from financially independent as we were just getting out of being negative from our loans. However owning our own place and living there (which we haven’t been doing yet but will be soon) will greatly reduce our living expenses. Food costs a lot less than it does where we live currently and we are closer to family which will reduce our travel expenses to see them. Eventually we want to get the place off grid and mostly self sufficient growing our own food which will also save us. We are even hoping to have extra cash crops to sell at local markets or to restaurants providing a side income as well as some other ideas we have to use the place for other income streams.
We are moving there in about a month and will still need to have regular jobs for now and continue to save hard. But for us living a self sufficient lifestyle on our farm financially independent with a small income coming from selling produce etc to fund any greater luxuries we want is the end goal.
So we have a long way to go but we are also pretty happy with where we are at in our early 30s. Our family has really benefitted from the past mining boom in Australia and we have really tried not to waste this very fortunate opportunity and turn it into something that will set us up for life. While we have been very lucky in this regard there is no reason someone who has earned less cannot also get there. It might just take longer or require stricter frugality.
We also think where we are at now is possible because we have been happy to live in a somewhat dated modest size house. It is alot less fancy than what alot of young couples might consider a suitable home. It is smaller and less fancy than what both of us grew up with as our family homes. But it has everything we need and we like it. Eventually we’ll paint it and retile here and there but nothing too major.
If this is all not for you then that is fine! I do not judge those that value other things and are happy working a standard job for most of their lives. I also realise those that are struggling from pay cheque to pay cheque near the poverty line this is unrealistic. For those of you id urge to do everything in your power to get a better paying job so you can begin saving money or to move to a place with a higher ratio of earnings to living expenses. Not necessarily to become FI but just so you can have less stress caused by a lack of money.
If any of you dear readers are also on a similar journey id love to hear it!
I look forward to bringing you all on this with us when we start our permaculture lifestyle youtube channel too so stay tuned!