In a world obsessed with hustling, the concept of Financial Independence and Retire Early (FIRE) is a refreshing perspective on life and finances. It's about taking control of your financial destiny and living a life fueled by passion and choice rather than obligation. This is my personal account of achieving financial independence as a programmer and how you can do it too.
What is Financial Independence?
Financial independence is the status of having enough income to pay one's living expenses for the rest of one's life without having to be employed or dependent on others. This idea of becoming financially self-sufficient is appealing to many, but how can it be achieved? There are different paths to financial independence and your strategy may depend on your lifestyle preferences, income level, and savings rate.
Within the FIRE movement, there are two primary paths: Fat FIRE and Lean FIRE.
Fat FIRE implies aiming for a more traditional lifestyle, generally necessitating a high salary and aggressive savings and investment strategies. It’s for those who don’t want to reduce their current standard of living but still want to retire early.
On the other hand, Lean FIRE requires minimalist living and extreme savings, living on $25,000 or less per year. This may involve a frugal lifestyle, but it also promises an earlier exit from the workforce.
What is your target FI number?
The basic principle of calculating your FI number revolves around the '25 times rule' and the '4% rule'. The '25 times rule' suggests that you need to have saved at least 25 times your annual expenses to retire. The '4% rule' states that you can withdraw 4% of your portfolio each year in retirement without exhausting your funds.
There are online calculators like FireCalc that can help you determine your unique FI number, taking into account your current savings, annual spending, and other important factors.
My Journey Towards Financial Independence
I began my journey towards financial independence at an early age. I started coding for cash before I even entered university. Although my earnings were modest, I adopted a frugal lifestyle to save and invest every penny I earned.
In the subsequent years, I juggled a full-time job, consulting, and even blogging. My work hours soared to 60-80 hours a week. Despite the grueling work schedule, I remained steadfast in my pursuit of financial independence.
When I started earning more, I resisted the urge to inflate my lifestyle. I maintained my frugal lifestyle and limited my spending to just 8-20% of my income, saving and investing the rest. I kept my focus on experiences over material possessions, avoiding unnecessary consumerism.
Along the way, I made savvy investment choices. I invested in rental properties, always ensuring that I negotiated hard and only bought properties that were a real steal. By the time I was 29, I had achieved lean financial independence.
Beyond Lean FIRE: Preparing for a Family
After achieving Lean FIRE, I realized that my financial goals needed to evolve as I was preparing for a new chapter in my life – starting a family. This realization required me to shift my strategy from Lean FIRE to accumulating more wealth to secure my future family's financial stability.
Despite this shift, the freedom that comes with financial independence remains. The luxury of choice is still mine. I can still afford to say 'no' to work engagements that don't excite me and even take on more risks knowing that my basic needs are already met.
Reach FI and then what?
Achieving financial independence doesn't mean you have to stop working. In fact, most people in the FIRE community continue to work in some capacity because they enjoy it, not because they have to.
Personally, I love programming and creating. It's been a part of my life since I was 8 years old, and I can't imagine giving it up. But, having achieved financial independence, I now have the freedom to pick and choose the projects that I want to work on. I no longer have to say 'yes' to every client or job offer. I can prioritize projects that excite me and align with my personal goals.
Leverage your privilege to secure your future
As programmers, we are often in a unique (and privileged) position. Our skills are in demand and we tend to earn relatively high salaries early in our careers. This offers an incredible opportunity to accelerate our journey towards financial independence.
The key is to start early, live frugally, and invest wisely. Choose a path - Lean FIRE or Fat FIRE - that aligns with your lifestyle and goals. Learn to strike a balance between the pursuit of wealth and the joy of living.
Remember, financial independence is not just about amassing wealth. It's about understanding the value of your time and energy. It's about gaining the freedom to choose - to say no to anything that doesn't add value to your life.
Building financial independence as a programmer is a journey. But it's a journey well worth taking.
Here are some books and blogs that have guided me on my journey towards financial independence: