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Breakdown: How to Become Financially Independent in 5 Years


If you’re looking to become financially independent as quickly as possible, you’ll want to begin by having a clear goal. Whether that’s 5, 10, or 20 years from now, the breakdown method will be the same.

To become financially independent in 5 years, do the following:

  • Calculate and find your financial independence number
  • Divide it by 5 (or your goal number of years to reach FI)
  • Break it down into monthly, weekly, and daily savings targets

Begin saving and investing! 

Keep reading for a further breakdown of the numbers below. You’ll likely want to do your own personal calculations using the following examples as a guide to calculate your own numbers. For tips on how to reach FI even faster, see the last section of this article.

How Can I Be Financially Independent in 5 Years or Less?

Calculate Your FI Number

The number of years by which you want to reach financial independence is personal. You may have these goals for specific reasons, or you may be setting a goal simply to help mark your journey to FI. Whatever the case, you’ll need to begin by determining your financial independence number.

Luckily, you just need a few numbers to do it – your annual expenses and expected retirement withdrawal rate. Simply divide your annual expenses by that withdrawal rate (we’ll be using 4% as a rule of thumb) and you’re set.

For example:

Annual Expenses: $50,000

Withdrawal Rate: 4% (which is 4 / 100, or 0.04)

Calculation: $50,000 / 0.04 = $1,250,000

Your Financial Independence Number: $1,250,000 (or the number you’ll need to have saved in order to retire and live off your investments)

Break Down Your FI Number (Without Investing)

In order to reach your financial independence goal, begin by breaking FI down into smaller chunks. Divide your FI number by the number of years in which you plan to reach financial independence.

Years to Reach FI: 5

FI Number: $1,250,000

Calculation: $1,250,000 / 5 = $250,000

Yearly Savings Goal to Reach FI In 5 Years: $250,000

In order to reach financial independence within 5 years, you’ll need to save at least $250,000 each year. If that seems a bit arbitrary, break your FI number down further by dividing out the amount you’ll need to save every month, week, and day of the year as well.

Monthly Savings Goal: $20,833.33 ($250,000 / 12 months)

Weekly Savings Goal: $4,807.69 ($250,000 / 52 weeks)

Daily Savings Goal: $684.93 ($250,000 / 365 days)

FI NumberYearsYearly SavingsMonthly SavingsWeekly SavingsDaily Savings
An example FI number broken down into different savings goals

Now you have a clear idea of what it’s going to take to become financially independent in 5 years. It’s not about arbitrarily increasing your savings rate to a random percentage, such as 80%. Saving 80% could mean saving $24,000/year or $240,000/year depending on your income! And if it’s the former, you’re going to need to add a few years to your FI goal. The key is to calculate how much you need to live on to be financially independent. From there you can break down your FI number into actual numbers that you can set as savings targets. 

How Savings Rates Affect Financial Independence Timelines

Based on annual expenses of $50,000 and an FI number $1,250,000, see the chart below for additional examples of years it would take to become financially independent. 

FI NumberYearsYearly SavingsMonthly SavingsWeekly SavingsDaily Savings
Examples of FI timelines changing based on savings rate

To create a similar chart for your personal calculations, simply find your FI number and complete the steps taken above to find out what you need to do become FI in 5 years. To adjust the number of years, complete the calculations in the same way but with your FI years target instead (e.g. divide your FI number by 10 instead of 5 if your goal is to reach financial independence in 10 years).

FI NumberYearsYearly SavingsMonthly SavingsWeekly SavingsDaily Savings
Sample savings rates needed to reach FI based on different FI numbers

How to Be Financially Independent by 25

Is it possible to achieve financial Independence by the age of 25? 

According to early retirees, four fundamental rules will help you achieve financial independence by the age of 25:

  • Track and understand your spending and saving
  • Invest strategically with time-proven methods
  • Maximize your education
  • Pick up a side hustle to grow your income

If your financial independence target is based on an age goal, the math will be the same as the methods shown above. The only difference is that you’ll need to calculate out the amount of years it’s going to take before you turn that age. 

If you’re 20 years old today, and you want to be financially independent by 25, just do the math (25 – 20 = 5 years) and divide your FI number by the answer ($1,250,000 / 5 = $250,000 saved every year from now until you turn 25). Then set a plan to help you put away that amount each year. If you’re 20 years old today and you want to be financially independent by 35, that’d be $1,250,000 / 15 = $83,333.33. That’s the number you’d need saved every year from now until age 35.

The traditional age of retirement in the United States is 65. If you were to enter the workforce at age 20 and work until the age of retirement, you’d need $1,250,000 / 45 = $27,777.78 saved every year until you retire. If you plan to retire earlier, your calculations work the same for how long your goal is to remain in the workforce.

FI NumberCurrent AgeYears WorkingYearly SavingsRetirement Age
How many years needed to reach FI based on savings

Note: the calculations in this and the above section are minimum estimations and don’t take into account the money gained through compound interest due to investments. Over the years of saving and investing, it may take less time to reach financial independence as your investments grow. Remember that investments are subject to market trends and will fluctuate year over year, but on average have historically trended upward over time. Check out this calculator to account for these returns in the above calculations.

How to Shorten Your Time to Financial Independence

If after completing your calculations you’re wondering how to expedite your FI timeline, don’t fret. 

There are many ways to shorten your time to financial independence:

  1. Start investing early
  2. Increase your savings rate
  3. Hack your job and your life
  4. Side hustle

Each strategy will help you lessen the time it takes to reach your FI number. The time you take learning and applying these strategies could literally save you years of traditional work it would otherwise take you to get there.

1. Start Investing Early

Let’s imagine that two friends graduated college and entered the workforce at the same time. Friend 1 decided that she would save and invest $500 every month until she was 35, then stop saving. Friend 2 decided that she would spend all her money during her twenties, and start saving once she turned 30. Friend 2 saved and invested $500 every month for the next 35 years. At age 65, who do you think will have more money? Let’s find out.

Friend 1

Amount Contributed: $90,000

Years Contributed: 15

Years Investments Grow: 30

Total investments at age 65: $1,150,524

Friend 2

Amount Contributed: $210,000

Years: 35

Total investments at age 65: $830,839

Note: assumed 7% annual rate of return on investments

Friend 1 contributed $120,000 less and spent 20 years less doing it, but still ended up with more money! 

The idea here is that the earlier you can invest, the better. The magic of compound interest is the key strategy behind making your money work for you, instead of having you work for your money. It’s not always about working harder, but working smarter. Front-load your investments as much as you can as early as you can to expedite your journey to financial independence. If you give your investments time to grow, you may find that you need less money saved than you thought.

2. Increase Your Savings Rate

If you had an annual income of $75,000 and annual expenses of $50,000, your savings rate would be 33%. That is, you’re saving $25,000 of your annual income, and spending the rest ($25,000 / $75,000 = 33.3%). If you saved and invested that $25,000 each year until you reach your FI number of $1,250,000, you’d reach financial independence in 50 years. 

FI NumberIncomeExpensesYearly SavingsSavings RateYears to FI
Chart depicting the effect savings rates have on years to FI

As shown in the chart above, the more you can increase your savings rate the sooner you can reach financial independence.

Note: the calculations above don’t take into account the money gained through compound interest due to investments. Check out this calculator to help calculate your savings rate while accounting for your expected annual returns.

3. Hack Your Job and Your Life

One of the quickest ways to increase your savings rate is to increase your income. If you made $100,000 annually instead of $75,000 and spent $50,000 in annual expenses, your savings rate would be 50%. Not only are you saving more money, but you’re saving at a higher rate than before as well. 

A simple way to achieve a higher income is to ask for a raise. You can do this by understanding how much value you bring to your company, and how much your value is on the market. Ask for a raise as a percentage instead of a dollar amount, since percentages are perceived as smaller than dollar amounts. Remember, it’s typically cheaper for your company to keep you around than it is to hire someone to backfill your position. If you find that you’re being underpaid and your company isn’t willing to make the investment, you can find a higher paying job for similar work. 

You may also consider going to school to gain additional skills to raise your market value. A short term investment in yourself could add several tens of thousands of dollars to your earning potential. Check out trade schools or higher degrees of education for your current discipline.

As for your spending, strategically work to cut down spending on your highest monthly expenses. These are typically your housing, food, and transportation costs. Cutting back these spending categories will give you quicker returns than if you were to cut back on multiple small categories of spending each month.

Large Expenses and How to Reduce Them

Housing costs: Try relocating to a cheaper neighborhood. If you’re in a city, you could move towards the outskirts or find a nice area in the suburbs. If you own a home, you may try renting out an extra room or finding a roommate to help make your monthly payments.

Food costs: One of the easiest ways to keep this expense down is to grocery shop and meal prep. Try making a meal you love in large quantities and portioning it out for lunches or dinners each day of the week instead of eating out. Pre-cook, prepare, and freeze your meals to grab them when you need them. Change things up by adding new spices or sauces to your favorite dishes. Find new recipes online or rent a cookbook from the library to try new cuisines.

Transportation costs: When finding ways to strategically bring down your housing costs, be sure to account for transportation as well. If you find a cheaper place to live but end up doubling your transportation costs as a result, moving may not be worth it. On the other hand, you may find comparable housing costs in a place closer to where you work. You could save money by walking or biking to your workplace while gaining the benefits of physical activity each day.

Try to find a sweet spot where you can lower your housing and transportation costs at the same time. Maybe your new place isn’t far from public transportation. You could take the bus to work and cut down on your gas bill. You may end up with some extra time on the commute to read, study, or work on a side hustle instead!

4. Side Hustle

Starting a side hustle alongside your regular form of employment is a fantastic strategy to increase your income and accelerate your pace to financial independence. There are many ways to side hustle, and you can spend your time working for yourself or working for someone else. 

Your side hustle can be in-person, participating in activities like dog walking, baby sitting, house sitting, etc. Or you can start a side hustle online. It’s never been easier to make money online, and you can leverage your time more easily through an online business. Learn to code. Write content. Online tutor. Flip products on Amazon or eBay. Start a blog.  Create a product and sell it online. The possibilities are innumerable. 

As for your bottom line, setting up passive income streams will help bring down your FI number. As you bring in streams of regular monthly income, that number can offset your monthly expenses. For example, if you make $500 / month online from a side hustle, that’d be $6,000 / year. If your annual expenses are $50,000 and you can expect that $500 each month perpetually, the amount of money you need to cover your expenses is now $44,000 because the extra $6,000 from side hustling covers the extra $6,000 of expenses ($50,000 – $44,000). If you extrapolate that number as your new cost of living number to calculate your FI number, you’ll find that $44,000 / 0.04 = $1,100,000, or $150,000 less than your initial FI number of $1,250,000!

FI NumberMonthly Side Hustle IncomeAnnual Side Hustle IncomeAnnual Expenses(Expenses) – (Side Hustle Income)Adjusted FI Number
How adding side hustle income affects FI numbers


Whether you’re trying to become financially independent in 5 years or simply trying to ensure there’s enough in your account when you retire, a few simple strategies can help you get there. Remember to set your goal and just start climbing. You may need to take a rest along the way, or recalibrate as you walk new terrain. It’s all part of the journey, and we know you’ll get there. We believe in you!

Climb on, FinBase


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John is a personal finance writer, editor, and a fellow FinBase climber. Tech worker by day, design owl by night, he is the co-founder and creator behind The Financial Basecamp.
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