Most people work a job because they have bills to pay. Most jobs are meaningless other than providing financial security. Would you still want your current job if money were no issue? That is a simple test.
There are 3 types of employees.
- One works on something meaningful and enjoys it.
- One works on something dull but can tolerate it for the monetary reward.
- One thinks that everyday in the office is a grind.
Regardless which category you fall into, you want to achieve financial freedom because it is the only way that you can always find something meaningful to work on. And you will also always enjoy it because you can drop it the moment the job loses its initial magic. For the first type and the second type, things can turn sour quickly at your workplace even if you enjoy your job for the time being. I fall into the second category.
How do we achieve financial freedom then? Let’s define what is considered financial freedom here. Financial Freedom gives you total control of your own time and puts you in a position of strength. When your total invested assets are 25 times as much as your annual spending, you are financially free. This is the base line.The basic idea is saving as much as possible , investing in low cost well diversified funds such as an index fund and working on a side hustle.
I started saving as much as I could right after I graduated from university and found a job in 2005. My savings rate reached 80% for some time, then 70% after my marriage before my kids. It has always stayed above 50%-60%. We drive old cars, use Tracfone, buy store brands and doing a lot DIY work around the house. The things we do not skimp on are food, travel and kids’ education. “Life is short and live a little” some people might scream. But the truth is that we have a wonderful life and never felt deprived of anything. Driving a fancy car or living in a big house means nothing to us. Lifestyle creep is a silent financial killer.
I started investing right after college. Active and passive investing are both my games. My main portfolio has only 3 funds in it. They are FSTVX , FZROX and FTBFX. It get re-balanced once a year. My secondary portfolio is for active investing/trading which I have been doing for over a decade. I have been through major bear and bull markets. This is one side hustle that I really enjoy and will keep doing for as long as I am lucid. Active investing is very risky if you do not have solid risk control and it is not for everyone. Another side hustle of mine is selling on Ebay.
In short, the 3 pillars of increasing my net worth are saving, investing and side hustling.