It has been 15 months since I last updated the Financial Independence 101 series (101, 102, 103), and wow, has a lot happened over this period. For ordinary people, 15 months doesn’t seem like much time.
For those seeking financial independence, 15 months is a lifetime. Why the disparity? Financial Independence seekers leverage every minute of their time to push towards their purpose. Let me examine my last 15 months.
Static income numbers. I’m not a huge fan of net worth calculations, but I can use them as a scorecard. When I wrote Financial Independence 101, we had $54,000 in investments and -$44,000 in debt.
HOW to Use Credit Cards
As I write this today, we have zero debt and $222,000 in investments. We went from a net worth of $10,000 to $222,000—pretty amazing stuff.
Passive income numbers. Now, my favorite metric is passive income. In December 2020, when I wrote the first article, we had $133 in passive income.
In December 2021, we had $1,083 in passive income only one year later. That is almost nine times more passive income than one year earlier. Again, time flies when you are on your grind.
Returning to our roots. Every once in a while, it’s good to return to our roots. It is hard to imagine a time when I didn’t understand passive income. My wife and I are almost three years into our passive income journey, and we’ve never been happier.
We occasionally reflect on how we stumbled upon words like passive income, dividends, royalties, house-hacking, and financial independence. It’s incredible how a few powerful words can spark a passion inside your soul and motivate you to change your life. Today, I want to review two of the most popular words out there—Financial Independence.
5 Steps to (Financially) Running a Household
What is Financial Independence? Financial independence is when you have enough money to live without working. Of course, that simple definition can lead to troubling results if you don’t understand the proper context. Let’s explore.
Income vs. Expenses. The most important part of starting your financial independence journey is understanding income versus expenses. The best book to read concerning this topic is “Rich Dad Poor Dad.”
In the book, Robert Kiyosaki does a fantastic job explaining income versus expenses, asset vs. liability, and how to read an income statement. If you can finish this book, it will change your life.
Income is money coming in, and expenses are money leaving. Here is where things get interesting. Most people (let’s say roughly 90-95%) receive all of their income from their primary job.
Your Income Should Increase Every Year
Expenses are money flowing away from your pockets. Some expenses will always be parts of our lives, such as taxes, utilities, and food. However, we increase our costs by adding liabilities such as car payments, credit cards, and student loans.
Assets vs. liabilities. Thus, most average people spend their lives collecting liabilities. The more liabilities they collect, the less cash flow they have to invest. Cash flow is the difference between income and expenses.
Liabilities increase expenses (bad), and assets increase income (good). If you spend your life collecting assets and avoiding liabilities, you will become rich.
Financial independence is when your assets can pay for your expenses entirely. Since you can live off your assets completely, you no longer have to work a job. Hence the word independence.
The Dividend Debit Card
It seems simple, why don’t most people become financially independent? It is straightforward to become financially independent. All you have to do is live below your means, reduce expenses, and invest in assets. What is so hard about this lifestyle?
The most challenging part is reprogramming your brain to think with an investor’s mindset. As you seek financial independence, you will become an investor. To free yourself, you will have to invest time, energy, and money into various assets.
However, most people want to invest in liabilities. Things like cars, vacations, and weddings lead to debt, liabilities, and stress. Debt keeps us from focusing on the future, as we are living beyond our means.
Overcome Financial Adversity
The American trap. The standard American attempts to do things the right way according to their upbringing. They go to college, get a job, work hard, get married, have a wedding, buy a house, buy two new cars, and have kids. If you follow this pattern, you will fail.
Your lifestyle will not lead to financial independence unless your parents leave you assets. The standard way of life in America (and other countries) is well beyond the income we make. Let’s look at it in a simple format.
- Income: Two jobs
- Expense: Student loan
- Expense: Wedding
- Expense: Mortgage
- Expense: Car payments
- Expense: Children
You have a couple of sources of income but even more expenses. On top of that, you can add vacations and gifts, and we are setting ourselves up for failure from the start.
A different path. Those on the financial independence journey take a different approach. Your friends and family will shun your lifestyle because it is boring and beneath them. You will do things like house-hacking, content creation, consulting, real estate, and freelancing.
JOMO vs FOMO
Once you create additional income streams, you’ll invest in dividends, interest, rents, and cryptocurrencies. These passive income assets will provide you income even if you are not working.
Once you have enough of these assets, you will have become free from bondage. You can wake up every day and know that you have income coming in even though you are not working. The average person cannot even fathom a life without a job.
The mindset is the difference. In the end, money has nothing to do with becoming financially independent. It is all a mindset. Without the proper perspective, people will always confine themselves to working a job and living paycheck to paycheck.
Business in the Metaverse
The book “Mindset” discusses having a fixed mindset versus a growth mindset. To achieve financial independence, you’ll need to build a growth mindset. Seeing the world through the lens of abundance, wealth, and friendship is different from scarcity, lack, and mistrust.
That’s why I always write about my financial mindset. Money is just a way to keep score of your positive mindset and the value you add to the world.
Conclusion. If there is one takeaway from this article, it is two focus on your mindset. Once you have the proper attitude, becoming financially independent is straightforward.
The Crypto Debit Card
But if renting a room, working a second job, driving a used car, or starting a blog all seem dumb, you’ll have fun at your job for the next 20-30 years. For me, there is no way I am working another 25 years—I’m done!
If my wife and I can go from $10,000 to $222,000 in investments in 15 months, surely you can achieve something similar. My book “Become CEO of Yourself 2” is a collection of 50 of my financial mindset articles. Download it for free here.
In its simplest terms, financial independence is having enough passive income to cover your expenses. It doesn’t have to be more complex than this.
- PDF of the Month: Don’t Gamble with Retirement 6 (Free 409-Page PDF)
- Free PDF Downloads: Download FREE PDF books here
- Financial Mindset: Become CEO of Yourself 2 (Free 196-Page PDF)
- Retirement Planning: Your Retirement Planning Guide 2 (Free 255-Page PDF)
- Investing: How We Plan to Retire on Dividends 2 (165-Page Free PDF)
- Cryptocurrencies: Counting on Crypto 2 (Free 159-Page PDF)
- Real Estate: Financial Independence through Real Estate 2 (Free 123-Page PDF)
- Business: Retire Rich, Retire Comfortable with a Business 2 (Free 185-Page PDF)
- Latest DGWR: Don’t Gamble with Retirement 5 (Free 431-Page PDF)
- Everything!: The Biggest Book on Passive Income Ever 2! (book)(Web Edition)(Art Edition)
- I bought a Kindle Oasis: Check it out Amazon
- Read My Books for Free: Free Kindle Books Schedule
- Crypto Exchange: My Favorite Crypto Exchange VOYAGER (Join Voyager)
- Kindle Unlimited: Why I Finally Subscribed Kindle Unlimited (learn more)
- Book Reviews: 54 Takeaways from 54 Books (book)
- Writing: Can Grammarly Make You a Better Writer?
- My Favorite Chromebook: The Ultimate Chromebook (direct)
- Follow us: On our Facebook Page and Join our Facebook Group
- Monthly Dividend Tracker (XLSX): Check it out on Etsy
- For more detailed analysis, join my Youtube: MFI YouTube Channel
Monthly Dividend Tracker Template: Buy on Etsy
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
Leave a Reply