In recent years, the FIRE movement (financial independence, retire early) has been the buzzword among young working professionals. It’s a popular plan and one that works great for many people. However, financial independence can take many forms, and there are many misconceptions about what it means to be financially independent. This article will discuss financial independence, how you can achieve it, and several myths surrounding financial freedom (which we will disprove). So, if you want to learn more about becoming financially independent, what it means, and how to achieve it, keep reading.
What Is Financial Independence?
Financial independence can mean different things to different people. For example, for young people, financial independence can mean getting a solid job and existing financially independently from their parents. However, for others, it might mean paying off their student loan debt or building up an emergency fund. Finally, for older adults, it could mean having enough money for retirement.
In general, financial independence is considered having solid finances that allow you to save for the future (emergencies, schooling, retirement) to the point where you can safely retire early or you’re on track with plenty of money to support yourself. Additionally, extreme financial independence can be considered owning a business or “side hustle” that generates enough passive income for you to live solely off of this money.
How Can I Become Financially Independent?
There are many ways to become financially independent, but much of it comes down to:
- A) budgeting your money appropriately
- B) saving your money appropriately
You don’t need to have an insanely high income to be successful at financial independence. All you need is to be careful and diligent with your money, having a plan for every paycheck. Below, we’ll discuss seven of the most popular myths surrounding financial independence and debunk them. Remember, not everything you read is the truth. There is a lot of false information out there, especially regarding finances. So if you’re ready to cut through the BS and get to the important stuff, read on.
It Isn’t Possible to Become Financially Independent When You Have Kids
Many people think that if you have kids, it isn’t possible to become financially independent and have enough money to retire early. Often, this is because people see kids as a massive expense that prevents them from saving money for themselves or for their retirement.
Sometimes, this can certainly be true! If you are in an unstable financial situation, having children can be a significant burden on your finances and can cut your savings or retirement contributions considerably. However, it only takes a little each month to start becoming financially independent, and having kids doesn’t mean you cannot budget. So, while you might have to cut down on some “fun” expenses, you can continue contributing to your savings and retirement accounts even with children. You just might need to be a little more creative!
You Need to be Extremely Frugal
Many people may think that you need to avoid “fun” spending and be extremely strict with your money to become financially independent. However, people who eventually became financially independent weren’t always living well below their means to do so. Instead, they made small contributions to specific accounts each month while sticking to a simple budget and avoiding copious unnecessary spending. Even with a “stricter” budget, you can still budget in categories like eating out and entertainment. Therefore, attempting to become financially independent doesn’t mean you can’t ever spend money on fun things, and it certainly doesn’t mean you need to take frugality to an extreme. Instead, it just takes good organization.
You Need to Have a High Income
Many critics of the FIRE movement and financial independence, in general, assume you need to have a high income and massive amounts of disposable funds to become financially independent. This is definitely not the case!
Naturally, those with higher incomes can allocate more money each month to their savings or retirement accounts. Therefore, they can become financially independent faster. However, becoming financially independent is really all about choices; choosing where to allocate your money, deciding what your money gets spent on, and determining how long you want to save for. People of any income level can allocate small amounts of money each month to generate interest in a retirement or savings account to help support their future.
You Can Only Become Financially Independent Through Privilege or Luck
For many people who don’t want to obtain financial independence or are cautious of it, it is thought that financial freedom is only gained through privilege or luck. Therefore, according to them, you must have come from money to achieve financial independence for yourself; otherwise, how would it happen?
The reality of financial independence is far different. Most financially independent people in adulthood have spent significant time and energy saving their money and allocating it into strategic places to help plan for their future. As they advance in their career, that money becomes more plentiful and generates interest. Conversely, many who are born into wealth squander their resources and become wasteful and entitled consumers. There is no proof at all that coming from a wealthy background means financial freedom for life.
Financial Independence/FIRE is a Scam
According to some people, the FIRE movement and those who advocate for financial independence, in general, are just trying to sell you on some “get rich quick” scheme. They’re con artists, and you’ll never actually get what they describe.
No one who legitimately and truthfully advocates for financial independence wants to take any money from you, nor do they advertise that you can get rich quickly. One of the founding principles of the FIRE movement (and similar philosophies) is that wealth takes significant time to build, no matter what income level you’re currently working with. People who advocate for you to become financially independent are on your side, and they don’t want to take the money that you’ve rightfully earned!
If You’re Financially Independent, You’ll Never Work Again
Some people who want to become financially independent (or have seen others do so) think that once you reach this level of independence, you never need to work again. While some people indeed quit their day jobs after generating a certain amount in their savings accounts, this is not the reality for most people.
Many people continue to work even after they have generated enough money to retire early. This can be for many reasons. Sometimes, it is simply because they love their jobs and are passionate about them. Other times, it is because they choose to live off the money from their current position until they decide to retire later.
“Financial Independence” Is Just a Trend
It is definitely true that financial independence and the FIRE movement have generated more buzz in the last few years than ever before. However, that doesn’t make the movement a “trend” that will pass next season. Instead, financial independence is coming into the spotlight because new technology has allowed people to truly take the fate of their finances and their lives into their own hands. This is a very freeing notion that many people just like you have decided to capitalize on.
The Truth About Financial Independence
As we’ve clearly shown, there are a lot of nay-sayers when it comes to financial independence. However, many of them are misled by false information and assumptions. While financial freedom isn’t easy to obtain by any means, it can be done by anyone who decides to put their mind to it. So, if you want financial independence for yourself and your family, go for it! Your future self will thank you.