The simplest math behind financial independence

Financial independence feels impossible for me.

You reach financial independence when you have 25 times your expenses.

Step 1: Calculate your expenses

Me: 20,000 per year

Step 2: multiple your annual expenses by 25

Me: 20,000 x 25 = 500,000

In theory, I need $500,000 to “retire” and live off my “investments”. Based on the 4% withdrawal rate.

I have not reached my FI number, but I am slowly making progress. The math for financial independence is simple, the path to getting there is not.

How to speed up your path to FI:

  1. Get a partner. Business or personal. More people working toward a goal will always make it easier.
  2. Make more money.
  3. Cut your expenses.

My FI number is misleading. I have drastically cut down on expenses. This is so that I can out more money into stock market investments in an effort to reach FI faster. I will go through the investment math in just a moment.

For better or worse this is the compound interest calculator I use


My road to financial independence will be slow. It can be really frustrating. I get annoyed that I am sacrificing and yet it does not seem like I am making much progress.

How is my FI number misleading? I am sacrificing today so that I can live better later on.

I love traveling and would love to go on expensive vacations. So my expenses in “retirement” are definitely going to be higher than they are today. I am sure my healthcare costs will also be higher as I get older. Right now I spend practically nothing.

The math behind your stock investments. Let’s say the stock market returns 7% annually. People will always agree and disagree with how much the stock market historically returns.

If you start with $1,000 and invest $1,000 a month = $12,000 per year, you will reach $1,000,000 in 29 years.

This is assuming you do not have to pay any tax on your investment.

$1500 per month will get you there in 24 years. $2000 per month = 21 years

$6000 per month will get you to $1,000,000 in 10 years.

What is the take away?

The more you invest the faster you reach F-U money.

You might be able to get better stock market returns are reach that number faster.

But the biggest ways to reach that number faster is to increase your income.

  • Get a high paying job
  • Work more hours
  • Start and scale a business aka sell some type of product/service – physical/digital
  • Buy/create assets – real estate, websites, oil rig, windmill etc.

Another take away

The more tax you pay the longer it will take you to get to financial independence. Make sure to pay your tax bill. There is no point in reaching financial independence if uncle sam comes and takes you to jail. What I mean is that you need to maximize your tax deductible accounts.

First work on maxing out your retirement accounts. Hit your FI number. And then worry about your plan to withdraw that money. You can pay the tax on it or create a plan to pay as little tax as possible on it. The best thing about life is getting to make the choice for yourself.

What is going to hold you back?


It is really easy to get sucked into what I call: The Glitterdome

This is the part of society that tells you, you need more stuff. Beautiful, expensive stuff. And worthless plastic crap that you will use once.

Don’t get sucked in.

Learn to live with less and spend time on relationships with individuals and experiences. You will never regret spending time with your parents or going to lunch with a good friend. Or going on a great vacation.

How do you avoid spending?

Become a creator.

Create something of value with your mind. It does not have to cost money. Ideas are free. Stories are free. There are lots of tools you can find and borrow for free.

Create as much as possible. Even if your creation sucks.

You get more satisfaction from your creation rather than consumption. Because consumption is like a drug. It wears off and you need more. Where as creation hast the ability to last. You can go back and see what you have created.

Become a creator if you want to reach financial independence.

Do not stress about money

I am saying this to myself. It is really easy to look at your bank account and thing that you do not have enough. Even if you have a lot it may not seem like enough.

There will always be a way for you to make money. Businesses will always need workers.

Whenever you start stressing about money, think of ways to serve. How can you be a creator? Take the skills that you have and translate that into helping someone for a fee.

Back to the math

What is your FI? I am curious what other people think. Leave a comment or shoot me an email.

I am shooting for an FI number of $1,200,000

I am sure that will change up and down in time.

Right now I am saving $2,000 and on track to reach FI in 18 years.

But I think I can increase my savings over time with more income. So let’s see how that goes.

Whatever you are doing keeping working hard. And I will keep everyone posted on my progress.

One thought on “The simplest math behind financial independence

  1. says:

    The road to FI is a marathon not a sprint. I remember feeling like we had nothing at one point. Then the day came when we realized our investments were making more money than our jobs. That’s when you know it was all worth it.


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