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What is your goal?

Reading time: 3-5 minutes (816 words)

If you want to become financially independent, you need to realise that this is a very random general goal. The real question is, what quality of life do you want before and after you are financially independent? 

And you have to answer this question before you start because this will determine your entire plan. Maybe you’ve already read or heard about Mister Money Moustache or Early Retirement Extreme. Both have a deep focus on becoming financially independent by investing a certain amount of your income. Based on the maths and principles I discussed in previous chapters. You can take this to the next level and ditch almost everything and live as frugal as possible.

In general, for most people becoming financially independent means:

  • Saving an X amount of income each month and invest in index funds
  • Live frugal forever

Saving money and living frugally compounds each other. The reason is simple, if you only buy things you really need, you can save and invest more money. In return, the compound interest generated by the machine grows. But there are a few huge draw downs if you want to take this route:

  • You need to give up your dreams
  • It can take decades

First, you need to give up your dreams. Always wanted a big house and a luxury car? Not gonna happen. Because you need to invest money rather than spend it. Going on vacation three times a year? Nope. Unless you buy a tent for a few bucks and set it up in the wilderness. A fancy five star hotel at the beach is out of the question. The more you give in to your wants, the longer it takes to become financially independent. The key factor here is your income. Only the few can pull off buying a huge home and luxury car. But they need a very large income to compensate for that. Unfortunately, most people only have an average income

Second, if you have an average income and can be decently frugal, it might still take many decades before you reach your goal. So you have to have a long breath. This can become a serious issue if you hate your job but you need that job to make your investing goals.

Saving rate Years till FI
15% 42.8 
25% 31.9
50% 16.6
75% 7.1

The simple fact is that compound interest only works wonders with a large amount of money or a few decades of compounding. Small amounts do add up over time but it takes a few decades. If you invest $425 each month for the next forty years, you “only” have $1 million (inflation adjusted). And assuming the stock market performs like the past. If you’re thirty years old right now, you’ll have one million when you turn seventy. Not able to spend a dime from that money building up in between. But after that you can spend $40,000 a year for twenty five years. That should be enough for the rest of your life (including other benefits like pension). It’s not a bad plan at all. It only takes four decades to achieve. And you can’t enjoy the money in the time you want to enjoy money the most. Let’s face it, spending a million when you are thirty is way more fun than spending a million when you are seventy.

Not to mention that people that are promoting this way (living frugally) earn way more money than they seem to make. They receive high incomes from their websites, books and meetings. Don’t be fooled by those people. Most of them already had high paying jobs (making over $100,000 a year) making financial independence much easier. Then they write a book or create a website about it and create even more assets. The reality is, they were not saving and investing for decades. While a normal person with a normal income does need a few decades to reach their goal.

Another example is Robert Kiyosaki. He mentions in his book Rich dad, Poor dad about real estate and how he made money. But did he make more money buying real estate or selling 32 million copies of his book? Not saying his advice is bad, it’s actually top notch but does he actually practise what he preaches? 

The other side of the story is building a business. Are you up for the task? It can take many years and you have zero guarantee for success. You’ll find some good resources for starting a business in chapter ten of this guide.

Maybe you don’t have great goals. That’s totally fine too. Maybe you just want to shift from working 70% and 30% free time to 30% work and 70% free time. You don’t need a business for that. You also don’t need to invest for many decades. But whatever path you choose, you need to make a change in your current lifestyle.


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