The First steps to Financial Independence and Early Retirement

The first step is always the hardest. Financial Independence is no different, it requires you to completely change your way of thinking. I am not going to preach to you like a lot of Financial Independence and Early Retirement blogs in the UK. The aim of Financial Independence is to be totally independent, to not have to work another day, to have enough money to live your life without having a care in the world. Sounds too good to be true.

The usual method is one where you give up everything, save every penny and live a boring life for 20 years. This doesn’t have to be the case. Before we get into that, lets delve a bit deeper into financial independence.

What is Financial Independence?

Financial Independence is something that is expanding rapidly in the UK and the community of bloggers and people looking to achieve FI is increasing day by day. However, it has been going on in the US for many years.

Financial Independence is having sufficient personal wealth and income without having to work to sustain oneself. Generically your assets are producing enough income to sustain you for the rest of your life. There are hundreds of definitions out there, but my view is that financial independence means you have enough money to survive without any further income.

So how do you know if you are financially independent? The formula is quite simple. I am going to use a story to explain it.

John and his wife spend £21,000 on the necessities in life. However, John’s wife doesn’t like the idea of not eating out once a week and doesn’t want to miss on their holiday each year. Therefore John and his wife spend £27,000 a year. John needs twenty five times this amount to be Financially Independent, John needs to save . £675,000. The day John and his wife have this amount in savings they are Financially Independent no matter how many years of life they have left.

(A multiple of twenty five times is the accepted amount. This is to allow annual withdrawals of 4% being accounted for in average growth of assets)

How does it work?

Lets continue our story…

John has saved £675,000 and has finally quit his job. Now he has quit his job him and his wife have decided that they want a bigger house, they have seen the perfect 6 bedroom house, and they have booked a round the world cruise. John can’t wait. John shouldn’t have retired.

This sums up Financial Independence perfectly. If you want to go on expensive holidays and have a mid life crisis and buy a Porsche, your amount of money needs to be far higher. When calculating what you need to save, you need to be vitally honest and make sure you are aware what is involved with being financially independent. Of course John could keep working and increase his savings to afford the bigger house and flash car.

Once you have your goal, you have taken your first steps. This can be quite powerful and I know it worked with me and provided me with a great deal of motivation. You know exactly what you need to achieve, but how do you go about achieving.

Spend Less or Earn More?

This has got to be the big question, do you focus on cutting everything out of your lives to increase the rate you are saving at, or do you earn more to increasing the level of savings you can make.

I can see argument for both sides of the story. I once heard, What is the point of turning on the taps if you aren’t going to put the plug in. Relating to our world, what is the point of earning more if you are just spending the cash you have at the moment.

The first step in my eyes should be to analyse your finances, cut out the waste, cut out the things you don’t need.

Does John  need to watch every Premier League match on Sky, never mind his season ticket? Does his wife need three different magazine subscriptions? 

However, focusing solely on saving money you will reach a barrier. You can find coupons and use cashback websites, but will this drastically increase your wealth? And will the time spent doing this be worthwhile? Will this reduce the age you retire by 10, 15 or even 20 years? Unlikely.

My philosophy is simple, I focus on creating wealth, increasing my income and my asset base, whilst keeping a close eye on what I spend and where I spend it. There is no right or wrong answer, each of us have different focuses and different mind-sets, and what works for me might not work for you.

What you should do next

That’s the big question. It’s easy to calculate what you need to retire or become financially independent. It’s even easier just to sit there and read all of my blog posts. The hard work is actually doing something about it.

Read my post on how to analyse your finances and cut the wastage. This is a great place to start and is an easy way to make small gains. Small gains at the beginning of the journey are vital, it provides you with that morale booster.

Set yourself some easy to achieve goals. Whether you want to earn an extra £100 from a side business, or save £50 off your bills. Small and achievable goals will give you the motivation to start working towards your big goal. What is your big goal? This is something I can’t help you with. Maybe reading about my goal and what I want to achieve in 2017 might help you.

The Next Steps:


There are thousands of websites and blogs out there you can read. This site will focus on helping you increase your income, to increase your wealth and how to look after your wealth. There is something for everyone, I will give you tips on ways to make money and how to generate income. These tips aren’t for the privileged few, these tips are for anyone and everyone.

One thought on “The First steps to Financial Independence and Early Retirement

  1. Perfect explanation.

    I agree completely that ‘what works for one, may not work for another’ which is why I haven’t gone into to specific details of my expenses, as my strategy is to only spend on what I ‘value’ but what I value will differ from others, and the face that I value it means I will not be swayed from changing this so there is no benefit in me logging it,

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