Why You Must Start Thinking About Financial Independence Now (Even If You’re Still Paying Off Debt)


Imagine a world where you had the freedom to plan your day as you wish. You wouldn’t have to wake up to the sound of pesky alarms, and you could do what you want to do, rather than what you have to do.

You could read leisurely for hours, or decide to go hiking in the middle of the week — in the middle of the day no less. You could focus on your hobbies and pursue your long forgotten passions.

Work would be on your terms and something that would fill your life with purpose, rather than deplete all your energy and consume the majority of your waking hours.

Sounds like a dream, doesn’t it? Well, this dream is a reality for a few financial rebels who have pursued financial independence in order to live life on their terms. And this dream likely isn’t as far off as you think. Here’s our best advice for how to become financially independent.

Here’s our best advice for how to become financially independent.

What is Financial Independence?

Financial Independence (FI) may sound like a pipe dream, but it is possible. To achieve financial independence, you need to have enough money in savings and investments, or in passive income (through properties or business) to cover your expenses indefinitely.

Reaching financial independence means that you no longer rely on regular income to survive and pay your bills.

Being financially independent takes you out of the rat race to enjoy other things in life like family, friends, and passions. Instead of working until you are 70, you can stop working at a much younger age and pursue life on your terms.

How Do You Become Financially Independent?

As you would imagine, you’ll need a lot of money saved and invested to achieve financial independence. But maybe not as much as you might think.

A standard metric that is often used is having 25 times your annual expenses in savings and investments, which accounts for a safe withdrawal rate of 4 percent, indefinitely. But how did this magic number come about? It’s not magic, but math.

Consider that average returns in the stock market are 7 percent before inflation. Inflation eats up about 3 percent, leaving you with 4 percent to safely withdraw each year. Of course, there are a lot of variables that could affect this calculation, but this is a general rule.

Financial independence is inextricably linked with how much you can save, as well as your cost of living.

For example, you don’t have to be a millionaire to be financially independent. Let’s say that you live in a low-cost area and that your expenses are very minimal. Your annual expenses are about $30,000 per year.

FI equation: $30,000 X 25 = $750,000

Yes, that’s a hefty number, but remember you aren’t saving that money all on your own. You’ll have the beauty of compound interest and time working on your side.

How Does This Relate to Me?

You may be thinking, “I’m in debt! How does this relate to me?!”

I remember when I first heard about financial independence, I simply laughed it off because that was for “other people”, not me. For someone in debt, it can seem like a totally different universe.

But think about how much you are putting to debt currently. If you have a high debt load like I do and are trying to pay it back as soon as possible, your payments could be close to $1,000 per month. What will you do with that money after you are debt free?

Once you are debt free, it’s easy to think, “What’s next?” Instead of succumbing to lifestyle inflation, you could have that money work for you and your future.

If you happen to put that same amount of money into savings and investing, you may very well be putting yourself on the path towards financial independence. But at the end of the day, it all depends on your expenses.

When I first realized this, I was incredibly motivated. For months, I had been frustrated at putting so much money towards debt each month.

But when I flipped the script and thought about my life after debt and what I’d do with that money, I suddenly became very inspired. If I could put that same amount into savings and investing while increasing my income over time, I could open up more possibilities in my future.

For so long I thought retirement was the real pipe dream for the Millennial generation. But paying off debt has given me the confidence to accomplish other amazing feats in my financial life, like financial independence.

How to start working towards financial independence now

If you are interested in pursuing financial independence, here are some key points to help you get started:

  • Pay off all your debt (and stay out of debt!)
  • Save much more than the prescribed 10 percent — more like 50-70 percent (yes, it’s possible)
  • Lower your expenses — each expense you cut out permanently is that much less you will need to live on in the future
  • Invest, invest, invest — look for investment vehicles with high returns and low fees

Financial independence opens up a whole new world of possibilities. Imagine if you never had to take a crappy job ever again. What if those money worries completely vanished from your mental landscape? What if you were free to pursue your calling?

Often we think of pursuing our passions as a luxury. To a certain extent, it is. But if you can invest with the same amount of fortitude it takes to pay off debt, why not open up other opportunities for your life? This is much preferred to me rather than be relegated to a prescribed 9 to 5 job where you work until you are 70.

You can go against the grain and do something different. Now, I know financial independence isn’t for everyone. But if you are looking for something different and are willing to put in the work, you can pave a path of possibilities.

Once you are debt free, you can use that same momentum to save and invest and pursue the life of your dreams.

Have you heard of financial independence before? Is it something you’re hoping to achieve soon?

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.58% - 7.25%Undergrad
& Graduate
Visit SoFi
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.57% - 6.32%Undergrad
& Graduate
Visit Earnest
2.57% - 6.49%Undergrad
& Graduate
Visit CommonBond
2.56% - 7.82%Undergrad
& Graduate
Visit Lendkey
3.11% - 8.46%Undergrad
& Graduate
Visit Citizens
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.