Financial Independence: Living Life on Your Terms

July 3, 2025

Imagine waking up without an alarm clock, sipping coffee at your own pace, and spending your time doing exactly what you want. That’s the essence of financial independence, often referred to as FI. While it might seem like a far-off fantasy reserved for lottery winners or tech moguls, it’s more realistic than you may think—with the right planning, discipline, and strategy.

Whether your dream is to retire early, travel the globe, volunteer full-time, or simply reclaim your time from the 9-to-5 grind, achieving FI gives you the freedom to make those choices on your terms.

Understanding Financial Independence

At its core, financial independence means having enough resources—whether from investments, savings, or passive income streams—to cover your living expenses without needing to rely on earned income from a job. It doesn’t mean you have to stop working. In fact, many people who achieve FI continue to work, but they do so because they want to, not because they have to.

FI is often associated with the FIRE movement—Financial Independence, Retire Early—but FI doesn’t require early retirement. Some aim for "Lean FIRE," where they retire on a modest budget, while others strive for "Fat FIRE," enjoying a more luxurious lifestyle. Ultimately, FI is a flexible concept that you can adapt to fit your personal goals and values.

Your FI Number: The Key to Financial Freedom

One of the most important steps toward financial independence is identifying your FI number—the amount of money you’ll need saved and invested to support your lifestyle indefinitely without earned income.

Here’s how to calculate it:

1.    Estimate your annual expenses in retirement or post-FI life. Include everything—housing, food, health care, travel, entertainment, insurance, and more. A common rule of thumb is that you’ll spend about 55% to 80% of your pre-retirement income, but it’s important to base this number on your own expected lifestyle.

2.    Multiply those annual expenses by 33. This multiplier is based on a 3% annual withdrawal rate—a conservative estimate designed to ensure your money lasts. For example, if you expect to spend $75,000 per year, your FI number would be $75,000 × 33 = $2.475 million.

This strategy assumes low inflation, stable markets, and minimal taxes or fees, so individual circumstances may vary. If you plan to retire earlier or expect higher expenses, your target may need to be even higher.

Strategies to Reach Financial Independence

Reaching FI isn’t reserved for the ultra-wealthy or extreme savers. With a well-executed plan, nearly anyone can make significant progress. Here are key steps to help you move forward:

1. Eliminate High-Interest Debt

Debt can be one of the biggest barriers to financial independence, especially when it comes with high interest rates. Focus on paying off credit cards and other costly loans. Explore balance transfers or debt consolidation if appropriate—but be sure to understand the terms.

2. Refine Your Spending

FI often requires a shift in spending habits. Review your monthly expenses and identify where you can cut back. Can you downsize your home, share subscriptions, cook more meals at home, or cut back on impulse purchases? Small changes can make a big impact over time.

3. Increase Your Income

Whether it’s negotiating a raise, changing jobs, or starting a side hustle, increasing your income can accelerate your path to FI. Even part-time ventures—like tutoring, pet sitting, or selling crafts online—can provide valuable extra savings.

4. Maximize Employer Benefits

Take full advantage of employer-sponsored retirement plans like 401(k)s, especially if they offer a match—it’s essentially free money. Also explore health savings accounts (HSAs) and other pre-tax benefits that reduce your taxable income and increase your savings potential.

5. Invest Wisely

Your investments need to grow if you want to reach financial independence. Focus on building a diversified portfolio of stocks, bonds, and other assets suited to your risk tolerance and time horizon. Consider automating your investments with recurring contributions.

6. Use Tax-Advantaged and Flexible Accounts

Tax-advantaged accounts such as IRAs and 401(k)s are essential, but remember they come with age-related withdrawal rules. If you want more flexibility, a taxable brokerage account allows for earlier access and can help fund a bridge between early retirement and traditional retirement age.

7. Plan for the Gap Years

If you plan to stop working before you’re eligible for Social Security or Medicare, you’ll need a bridge strategy. This could involve drawing from taxable accounts, budgeting for private health insurance, or delaying Social Security to boost your benefit.

Taking the First Step Toward Financial Independence

Financial independence isn’t an overnight achievement—but it is a destination you can steadily move toward. The process starts with defining your goals, calculating your FI number, and then building a realistic plan that aligns with your income, lifestyle, and timeline.

You don’t have to go it alone. Financial advisors and digital planning tools can help you navigate the journey and adjust as your situation evolves.

Remember: FI isn’t about extreme frugality or deprivation—it’s about freedom of choice. Whether you want to spend more time with loved ones, explore the world, or start your own business, financial independence empowers you to live life on your terms.

Sources:

https://www.fidelity.com/learning-center/personal-finance/how-to-fi

Disclosure:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.