How to Reach Financial Freedom in Less than 10 years


How to Reach Financial Freedom in Less than 10 years

No, you don’t have to save 25 times your income

During the pandemic, I’ve developed a simple definition of personal financial freedom:


Doing work you love without ever worrying about how you’ll pay the bills.

This the exact opposite of early retirement. In fact, once I achieve this definition of financial freedom, I plan on working as long as I can, just not as hard as I have been.

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Achieving this definition of financial freedom comes down to a simple math problem, I call “the financial freedom equation.”


Financial freedom= (Investment income + income from work you love) > Your living expenses

The beauty of distilling financial freedom into a simple math problem provided me much needed clarity on my financial goals.

I used to have the really terrible goal of “building as much wealth as possible.” Which at first glance doesn’t sound bad at all; who wouldn’t want to build as much wealth as possible? The problem was that, by definition, this goal had no off-ramp.

Now, I have a clear off-ramp; when I can sustainably fund my life through a combination of investments and work that I love, I’ve achieved financial freedom.

Read also: 3 reasons to start an online business this year (check this out)

Let’s simply break down the financial freedom equation into its three components.

#1 — Investment income

I used to refer to investment income as passive income, but the internet has stripped that phrase of all meaning. If you own stocks, bonds, or real estate, those assets generate income. That’s what I’m talking about when I refer to investment income.

The highest form of financial security is having enough investment income to cover your living expenses. Why is that? Because it’s the only form of reliable income that does not require you to do any work.

Followers of the Financial Independence, Retire Early (FIRE) movement take this concept to the extreme and aim to save 25 times their annual living expenses before they consider themselves financially free.

That sounds pretty great… On paper.

In my most viewed article ever, I explain why it takes most people a lifetime to save up that much money.

So, yes, it’s important to begin building up passive investment income but don’t obsess over it. Understand that it will take years or decades to have enough money invested to cover your living expenses.

This is completely okay because you have an asset more valuable than any stock or piece of real estate; your human capital.

#2 — Income from work you love

Your human capital is economist speak for your ability to earn income by taking a job or starting a business.

Most of us take a job doing something we are good at, even if it’s not something we love.

Nothing wrong with that; we all have bills to pay and companies are not lining up to hand you your dream job with remote work options. That’s why I decided to create it myself.

Here’s how I managed that.

First, I found a subject that I love and have been studying my entire life. For me, that was personal finance; for you, it might be baking or MMA.
Next, I found a way to monetize that subject through a side hustle that provides me scalable income. Scalable income is a fancy way of saying I am not guaranteed to earn a dime, but there’s no cap on my earning potential.
That sounds simple, but let me assure you it is incredibly hard. If it were easy, you could go quit your day job right now. Since it’s not easy and there’s a high risk of failure, the smart move is to make it your side hustle rather than your full-time job.

The real beauty of keeping this your side hustle (for now) is that it allows you to save 100% of your side hustle income and begin building your investment income much faster.

I’ve tried and failed to build scalable side hustles in the past. When it fails, it’s deflating, but when it hits, it can be life-changing.

In the past three years, I’ve been able to invest $75,000 in the stock market from the income I earn through my scalable side hustle.

The final piece of the equation is the most important. It’s also the one you have the most control over.

#3 — Your living expenses

So far, we’ve covered income which is one-half of the financial freedom equation. If you are really serious about financial freedom, you need to dedicate as much attention to the other side of the equation, which is your living expenses.

The problem when people start making a lot more money is that they start spending a lot more money. We call this lifestyle inflation, and it’s the easiest way to ensure you never reach financial freedom.

I’ve been able to save so much money as I’ve increased my income because I kept my largest living expenses in line. I don’t think twice about buying a $5 coffee or going out to dinner with my wife. But I am militant about keeping my “big 3″ living expenses in check.

The most important financial decision most people make is where they choose to live and how they get around town. So if you want to reduce your living expenses and speed up your timeline to financial freedom, focus on your housing and transportation costs.

As I often say;

Live in the smallest home you are comfortable in and if you can, take the bus, if you can’t; drive the crappiest (and safest) car you find.

If you can do that, you are well on your way to solving the financial freedom equation.

(For a deeper discussion on housing costs, I suggest you read this article.)

The 10% rule: Financial freedom in 10-years (or less)

Remember, the goal of financial freedom is to fund your life doing work you love. If you want to reach financial freedom in the next 10-years, you might find inspiration in the 10% rule:

If every year you can replace an additional 10% of your current income doing work you love, you can achieve financial freedom in no more than 10 years.

If you make $50,000 from your day job in year one, you will aim to make $5,000 from your side hustle. In year three, your goal would be to make $15,000, and by year 10, your goal would be to replace your entire $50,000 income doing work you love.

Can you get there faster than 10 years?

Yes, there are many different ways to reach financial freedom in less than 10-years.

You have a side hustle that can replace more than 10% of your income per year.
You already have a lot of financial capital. Remember, you need your investment income + side hustle income = your living expenses. So the more investment income you have, the less income you need to replace from your side hustle.
You have low living expenses relative to your income.

That last point is key because you don’t necessarily need to replace all of your income from your 9–5; you need to generate enough income to cover your living expenses.

If your savings rate is 0%, meaning you spend everything you make, then yeah, you will need to replace all of the income from your day job. However, if you are currently saving 30% of your income, then you may only need to replace 70% of the income you make from your day job.

In the end, basically, all of personal finance comes back to your living expenses.

Read also: How to make more money in 2023, stop these 15 bad money habits (must read)

A 6 bullet point recap

Financial freedom=Doing work you love without worrying about the bills.
You don’t need to save 25-times your income to achieve financial freedom.

If you can earn enough money from your investments + income from work you love, you’ve achieved financial freedom.

Starting a scalable side hustle around an issue, you are passionate about and have expert knowledge in can allow you to refocus your human capital towards something you care about.

If your side hustle can replace 10% of your 9–5 income each year, financial freedom can be yours in 10-years or less.

The most important thing you can do is keep your living expenses in check. To do that, focus on your housing and transportation costs.

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