Last Updated on February 23, 2025 by Michelle
This post is about systemizing your way to get to your financial independence to retire early to start working on what you love.
“What’s the price of your dreams? Make the game winnable” – Tony Robbins
1. Have clarity in the number
Tony Robbins, in his book Money Master The Game, lays out that there are 5 different types of Financial Independence that people could be thinking of. Hence, let’s define these first.
Financial Security
This is the amount you need in order to have absolute basics taken care of, without having to work. This means your basic home, utilities, food, basic transportation expenses. Having this amount does not include non basics such as holidays, leisure and entertainment.
Financial Vitality
This is the amount you need in order to have basics taken care of plus some extras, without having to work. This would include some dining out, gym membership or a massage treatments.
Financial Independence
This is the amount you need in order to have basics plus extras and you have money that works for you. For many, this number equals the amount to have to maintain your current lifestyle without having to work.
Financial Freedom
This is the amount you need to be independent plus two or three significant luxuries you want in the future (e.g. luxury winter family vacation).
Absolute Financial Freedom
This is the amount you would need to be able to do anything you wanted, anytime you wanted without having to work.
For this blog, I would focus on Financial Independence as I think that’s most people’s goal, or at least, the initial goal. To not work and yet be able to maintain current lifestyle from working.
2. Make your plan to get to the number
So let’s get to the calculation
What is your average monthly expense? In order to calculate this number, I suggest you do step 1 of my prior post. This will ensure your number gets more accurate without unnecessary expenses which will inflate your final number. Multiply that number by 12 and then multiply again by no. of years in retirement. That’s your amount. Once you have the number clear in your head, your brain will then think of HOW you can get to that number.
Due to the formula, when you retire early, the number will become larger naturally. So in order to achieve financial independence retire early, you will need to start investing earlier.
Invest
Most of us make the mistake of thinking that the gap between your current savings and the number will close linearly. Assume your Financial Independence number equals $4,000,000 (assuming $200k/year*20 years) and your current yearly savings equals $60k. No. of years you’d need to save up to your Financial Independence number will be 67 years. And you’d give up because you’d not think you don’t want to work for another 67 years to get to financial independence.
Instead, what you need is to invest EARLY to reap the benefits of compound interest on your investments.
Accelerate
Given the investment formula, there are just 4 things to accelerate your investments 1. Save more in order to increase your investment amount (Principal) 2. Increase your number of years (t) where interest is compounded, 3. Increase annual rate of return on investments (r) 4. Increase number of times the interest is compounded per year (n)
In each of the 4 variables, there are different methods of increasing each number. This is where you should spend most time thinking to achieve your Financial Independence sooner. What you invest in, depends very much on individual risk appetite, goal, investment time horizon etc. What is important for you to understand is that savings alone will not get you to financial independence. You need money to work for you through compound interest. That is the only way to get to financial independence for most people who aren’t born with millions.
This is the step where you can read investment books on asset allocation etc. I would highly recommend Tony Robbin’s Master the Money Game as he has interviewed the industry’s experts for an average individual investor like you and me.
Retire early and work on what you love
Second part of financial independence retire early is to define retirement. The way I think about retiring early is to not completely stop working but to stop the work that you have been doing if the work isn’t what you love. I believe everyone should be working as long as they are able to, but working and working on what you love are two very different things. I would advocate for retiring early to work on what you love.
When you continue to work on something you love and one that pays something, your number wouldn’t be too daunting.
3. Execute on the plan
This step is where you keep up the strategy. Again, there are many strategies but I would recommend you take the strategy that you feel most comfortable in. For me, that is to buy and hold. A book to recommend here would be Nick Maggiulli’s Just Keep Buying . Buying and holding without selling is a strategy that works best with me. This step takes a long time, but helps when you review on a periodic basis, for my case it is monthly. Sometimes you might need to course correct, but that’s part of investment journey given it is a lifelong journey.
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