I wanted to put this on here for anyone who needed to hear it as part of my “more-hope” campaign for 2024. I learned this later in life, which I think is normal in that financial independence has its stages. However, I wish I learned it sooner. When I was in my late twenties and newly graduated from dental school with nary a drop of financial literacy to my name, I thought that being financially independent meant you never had to work a day in your life ever again. Over time, my perspective matured. I now know that you don’t need to be debt-free to be financially independent. I now define financial independence as separating your life from needing to work in order to make money to support your lifestyle. Which means you can actually be financially independent at a younger age, making life decisions without worrying about making money.
When did I change my mind?
I didn’t learn that I could reach FI (financial independence) before paying off my student debt until I did the unthinkable: I quit a job I hated without plans to work again in the near future. I was able to do this by increasing my savings to the point where I had the “FU money” to walk away. At the time, I had mastered control over my budget using an online budgeting tool called YNAB. I still use YNAB to this day and now have enough savings to buy my husband and I 1.5 years of non-work while keeping all our current monthly payments including our house mortgage. You can learn to set up your own budgeting tool with my free course as well.
After I quit my job, I realized the world didn’t fall apart. I didn’t need to look for another job as people came clamoring over, asking me to return to the workforce in all sorts of fields. Surprisingly, other people don’t seem comfortable with the idea that I could get off the hook and not work. I had to set my boundaries and limitations when I did end up re-entering. And guess what? They honored all of it! When I asked for less days, they gave it to me. When I asked for more pay, they gave it to me. When I asked to work from home, they gave it to me. By quitting my job, I had full autonomy of my life. And my life became 100% better, because it was genuinely about what I wanted. My wealth continued to grow even though I was working 2 days a week at the time. Since quitting a job I hated, we sold our first home, and bought two more homes, leveling up each time. We now own a house that is double the home value of our first. We tripled our retirement account bucket. And our savings sky-rocketed.
Cash on hand buys freedom.
At the same time, I saved enough money to pay off my whopping student debt by the time debt repayment resumed at the end of 2022, 7 years after graduation just like I planned. I chose to keep the debt because I learned in the last few years that having cash on hand is what buys us our financial independence. At the same time, our cash savings is earning us 5.5% interest in our Marcus High Yield Savings Account (my readers get an additional 1% APY bonus if they sign up through my link here). (I recommend a HYSA for everyone’s emergency fund BTW!) And with the new SAVE plan for student loans, we are actually making money by holding on to it!
Today, we have enough accessible savings to be able to walk away from both our jobs and live 2 years while keeping our current expenses such as our house mortgage. If we got rid of everything along with our jobs (aka sold our homes and cars but keep our retirement accounts and investments), we could travel the world for more than five years without ever needing to earn money or changing our spending habits. At the same time, our retirement assets will continue to grow even if we don’t make contributions to it. Because I don’t predict we would NEVER return to the workforce, what I now define as financial independence is the space to not worry about job security. The margin that savings can provide makes a huge impact in our lives. I also don’t predict we would both lose our jobs at the same time. However, we may both choose to walk away to take Casey on a grand adventure around the world before he starts school!
I would like to attest to the fact that we are by no means special. Anyone can achieve enough financial independence to walk away from a toxic work environment. By choosing to live intentionally, you can spend on the things that add value and skip on those that don’t (surprisingly a long list!). Start by budgeting out your spending to plan ahead. Then save the rest in a high yield savings account. If you have a big dream (such as switch careers, pursue a passion, travel the world, or start a family) but have been too afraid to voice it because it might be too big, this is the year to face it head on! With a little bit of work, you too could reach FI sooner than you once thought.
