11 Financial Independence Tips – From 11 Early Retirees


Looking for some tips on achieving financial independence? Look no further, and review these 11 tips from the community of people who have reached financial independence for themselves. Their stories and lessons are important guideposts for you on your way up your financial mountain.

Time is Greater Than Money

When it comes to your money, it’s easy to understand because it’s something you can hold in your hand. It’s physical, tangible, and you can do something with it. Time, on the other hand, isn’t like that. You can use time in similar ways, but can’t handle it in the same way you do money. You can do things with your time, and you can do things with your money, but it’s important to understand how time and money are different, yet connected.

Paula Pant, author of Afford Anything teaches this critical mindset – you can afford anything, but you can’t afford everything. And that’s because there’s a tradeoff between your time and your money

A person earning $54,500 a year earns $27.25 per hour (working 40 hrs/week, 50 weeks/year). They lose 28% of their income to taxes, so their take-home pay is $19.62 per hour.

Filling a $50 tank of gas = 2.5 hours of their life.
Buying a $100 jacket = (Actually costs $108 after taxes) = 5.5 hours of their life

If you can shave $150 off your weekly expenses, you’ve given yourself every Friday off. You’ve saved an entire working day of your life, every week.

However, the total amount of hours you spend working may be more than that if you take all factors into consideration.

If you count “prep time” as part of the “Total Time Cost of Working,” you’re devoting 60 hours per week (12 hrs/day, 5 days/week) to working. Divide that by your salary, and you earn $18.16 per hour before taxes, or $13.07 per hour after taxes.

… Next, subtract out the “Financial Cost of Working” from your gross income. After all, you need to buy work clothes, pay for gas, maybe get dry-cleaning. Your boss might expect you to answer email round-the-clock, so you get a $89/month smartphone in order to stay connected. You’re also expected to keep a printer, computer and perhaps a scanner at your house — none of which are tax-deductions, because you’re someone else’s employee.

These expenses could easily knock you down to a total take-home pay of $11 an hour.

Paula’s breakdown on cost the hourly cost of living

When making financial decisions, it’s important to consider how much of your life it will cost instead of your money. Your money is a tool that allows you to make decisions. If you use it to purchase something, you lose the opportunity to purchase something else with it. And what you’ve really done is trade a portion of working hours for that thing you’ve purchased. Was the investment in time worth the purchase? Or would it have been a better trade off to save the money, invest it, and let it begin working for you instead? Evaluate your purchases by shifting your mindset to trading hours for things instead of just money.

Begin With the End in Mind

Jason worked in biotechnology for 23 years before leaving his career and achieving financial independence. He now writes about his finance journey on his personal blog. He has an open mind about his life and his direction in it. And it’s important for you to find your direction from the start as well.

If your identity is tightly wrapped up in your former job as is common, it will be a substantial change when this is removed. Thinking about your purpose and what defines you and is important now, is really useful. What is your next phase of life going to be about?

Reflections from one year of early retirement

When it comes to financial independence, you’ll be beginning another phase of life as soon as you reach it. Once you hit that FI number the sun won’t perpetually shine and all the things you want in life won’t suddenly appear before you. However, many (if not all) of the doors you ever wanted to walk through in life may now be open to you. It’s important to know which doors you want to walk through. Be sure to plan out your post-FI phase of life. What do you want in life? How will you achieve it? Can you start preparing for those goals today? What skills do you want or need to have in order to live the life you are hoping to? Start today and plan for tomorrow. Once you reach the summit, you’ve got to know where to go next.

Calculate your Financial Independence Number

Brad and Jonathan host a popular podcast called Choose FI. In it they discuss everything you need to know about becoming financially independent, and have worked diligently to empower a community of followers to pursue financial independence. One of the critical pieces of this pursuit, however, is calculating your financial independence number, or the amount of money you need saved to live off of forever. This calculation should be a personal calculation, instead of utilizing bucketed approaches most online calculators use.

The online calculators base their retirement estimates on a combination of your age and income. But they make one huge and erroneous assumption: that your income and expenses are proportionally and irrevocably linked.

How much money you’ll need to retire is directly correlated with how much you spend, not how much you earn. For those on a traditional retirement path, income and expenses can be closely related.

When you are on the path to FI, your spending is more intentional. You aren’t trying to keep up with the Joneses living next door and your savings rate is high. In other words, there is a significant gap between what you earn and what you spend.

Choose Fi’s simple math

Calculating your financial independence number is easy (25x your annual expenses), but personal. This is because the amount you’ll need will change over time as your needs change. It’s important to continually monitor or adjust your FI number.

Get and Stay Out of Debt

Take it from J.D. Roth, an early retiree and author of one of the most respected and beloved personal finance websites Get Rich Slowly, getting out of debt will lead you to financial independence. If you’re in debt, get out of it. And once you’re out of it, stay out of it.

After twelve years of reading and writing about money, I’ve come to believe that debt reduction ought to be a side effect and not a goal. Getting out of debt is a target, not a habit. … If you restructure your life so that you’re spending less than you earn, you will get out of debt. It’s a natural side effect.

Having said that, I realize that (many) are struggling to get to square one. Getting out of debt is their goal and primary obsession. That’s okay.

Before you can begin repaying your debt, you must be earning a profit. Unless your income exceeds your expenses, your debt is actually increasing. If you’re continuing to add debt, or if you’re only able to make minimum payments, you must first find ways to spend less and earn more until you have a positive “saving rate”. (Both businesses and people earn profits. But when individuals earn a personal profit, we call it “savings”.)

After you’re earning a personal profit, you can (and should) make debt elimination a priority.

J.D.’s advice to get out of debt

Increase Your Savings Rate

In his pillar article, the shockingly simple math behind early retirement, Pete Adeney (also known as Mr Money Mustache) broke down the relationship between your savings rate and the remaining working years you have until retirement.

Savings RateWorking Years Until Retirement
The relationship between your savings rate and retirement is based on your financial independence number calculations

When it comes to increasing your savings rate, you can read everything you need to know here. Avoid pitfalls and continually build your savings rate by cutting back on your largest expenses, and grow your income over time while keeping your expenses the same. With the money you save, be sure to invest it!

Invest Simply

Investing your money. Pretty scary, right? Well, not really. Especially when you take the simple path to wealth, as defined by JL Collins. From his extremely popular stock series, he breaks down investing into a few simple tools (with examples).

1. Stocks.  VTSAX (Vanguard Total Stock Market Index Fund)  …  It is an index fund that invests in stocks.  Stocks, over time, provide the best returns and with VTSAX, the lowest effort and cost.  This is our core wealth building tool and our hedge against inflation.  But, as we’ve discussed, stocks are a wild ride along the way and you gotta be tough.

2.  Bonds.  VBTLX (Vanguard Total Bond Market Index Fund) Bonds provide income, tend to smooth out the rough ride of stocks and are a deflation hedge.  Deflation is what the Fed is currently fighting so hard and it is what pulled the US into the Great Depression.  Very scary.   The downside for bonds is that during times of inflation and/or rising interest rates they get hammered.

3.  Cash.   Cash is always good to have in hand.  You never want to have to sell your investments to meet emergencies. Cash is also king during times of deflation.  The more prices drop, the more your cash can buy.  But idle cash doesn’t have much earning potential and when prices rise (inflation) its value steadily erodes. We tend to keep ours here:  VMMXX    …

So that’s it.  Three simple tools.  Two Index Mutual Funds and a money market and/or bank account.  A wealth builder, an inflation hedge, a deflation hedge and cash for daily needs and emergencies.  Low cost, effective, diversified and simple.

It can’t be that simple, can it? While there certainly will be additional considerations, like your asset allocation, it really can be this simple. Keeping your fees low and setting up your accounts to begin saving will get you on your way to financial independence.

Max out Pre-Tax Retirement Accounts

Sam (also know as Financial Samurai) reached financial independence by putting his financial know-how to good use, and he openly shares his experience and wisdom. With finance degrees and experience in the finance industry, he runs one of the largest independently run personal finance websites, achieving over 1,000,000 visitors a month.

There is no excuse not to take full advantage of tax-advantageous vehicles. You will adjust to your paycheck. Tax is your greatest ongoing liability. Your goal is to defer and minimize taxes for as long as possible

From Financial Samurai’s core principles for achieving financial independence

Most people aren’t maxing out their tax-advantaged accounts. Some save more as they near retirement age, but if you’re looking to become financially independent sooner, this is a basic pillar in your investment strategy. Doing so brings down your taxable income while getting to build up your investments with pre-tax money.

Invest Early

Investing your money early and often will allow you to take advantage of compounding, the 8th wonder of the world. This is the mindset behind making your money work for you. Additionally, investing early in your efforts can have the same impact, as noted by Ramit Sethi, who teaches people how to be rich.

Smart investors know they’re doing themselves a massive favor by investing as much as possible as early as possible. The same goes for your work. Most people have a lot more ambition, drive, passion, and energy in their twenties and thirties than later in life. Plan for that nearly inevitable scenario by front-loading your work.

By working weekends, long nights, and extra hours earlier in your life, you’ll set yourself up nicely to work less and make more money later in life. The efforts you make in a career or your own business today become amplified and compounded as the years continue.

As a wise person once said: the best time to plant a tree is 20 years ago. The second best time is today. If you’re still feeling the energy and drive to make something happen for yourself, give it all you’ve got while you still can and you’ll reap the rewards later in life.

You may not work less and make more money immediately, but over time, you’ll begin to see a powerful shift.

From Ramit’s 80/20 rule

By investing early, you can leverage your best efforts now for your best time later. You can delay gratification in the short term for long term rewards, or spend a long time working for rewards you can leverage for a shorter amount of time later. The choice is yours, and in how you invest.

Making More Money > Cutting Back on Expenses

If you’re looking to expedite your way to financial independence like Grant Sabatier did in 5 years, you’ll need to take advantage of the upside of money.

While both sides of the coin matter, there’s a limit to how much you can cut back, but not a limit to how much you can make.

Spend more time finding ways to make more money than looking for ways to save it. While both will help you reach financial independence, making more money so you can invest more money is an X factor and will accelerate compounding.

From Grant’s 15 best money lessons

While cutting back on expenses increases your savings rate today, it’s better to continually grow your income and invest it to take advantage of compounding gains and climb the curve to FI over time. Figure out your spending level by scaling back your expenses and determining how to use money in ways that can help you achieve your goals and maximize happiness. Don’t save until it hurts – sacrificing your health or basic necessities to live. Simply maintain your expenses and grow your income, and you’ll reach financial independence a lot sooner. For greater detail, check out our article where we break down these two strategies.

Eliminate Unhappiness

Becoming FI won’t make you happy unintentionally. If you spend a lifetime participating in unhappy activities to achieve some net worth end goal amount, you won’t be happy when you hit it. It’s only through the elimination of these unhappy activities that you can find out what makes you truly happy. And your journey and eventual goal of financial independence is to be used to magnify that happiness.

Take Brandon’s story for example. Better known as the Mad Fientist who reached financial independence in his thirties, who took time to learn this for himself.

Although hitting my number didn’t instantly make me happier, the pursuit of FI allowed me to eliminate nearly everything that used to make me unhappy and as a result, has vastly increased my happiness.

I no longer have to commute to work, I’m not trapped in the office from 9 to 5, I avoid most of the meetings I despise, and I don’t have to deal with office politics, thanks to FI and the power of quitting.

I had enough money in the bank to leave our house vacant while Jill and I travelled around the States and Scotland visiting our friends and family. Had we not had that luxury, we would have been forced to remain isolated in a place we didn’t want to live anymore.

My savings gave me the option to sell our house at a loss, which eliminated the stress of having it sit there empty during the Vermont winter (that amount of stress would not have been worth any amount of money).

The list goes on and on.

Brandon’s thoughts on happiness

Your journey up your financial mountain is to be enjoyed because life is to be enjoyed. Yes there will inevitably be wind storms and days when the sun doesn’t shine. But you’re out ascending a beautiful mountain – take time to breathe in the fresh air for what it really is. It will make the deep breath at the top that much sweeter.

Financial Independence Isn’t the End, It’s the Beginning

Renown author, writer, and speaker Vicki Robin has come to understand the lessons that life has meant to teach us. And it’s about teaching others.

(The FIRE) community thinks getting FI is the whole journey, and it’s really just the first quadrant … you pass through that portal (financial independence) and you find yourself in another landscape.

Vicki Robin playing with fire

And once you find yourself in that landscape she says, you find that it’s “uncontained”.

After reaching financial independence, the vast world of possibilities open up. Vicki asserts a pattern she sees many go through – beginning with figuring out what you want in life. People travel, work, don’t work, etc. But at some point, they come to realize how they got there. They begin to see wealth, poverty, and eventually learn that you can be poor and happy or rich and unhappy. Money has nothing to do with it. Your life is your own, and it’s your responsibility and opportunity to find happiness in it.

And once you do, go and help others find out what’s most important as well.

Climb on, FinBase



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.
Join the Climb

Subscribe for tips on your journey towards financial independence.

Reach Your Summit