Sprinting to the Finish
One of the hardest ways to become financially independent is to sprint to the finish. There are a few ways to sprint: graduate college with a high salary job and save like crazy, get a large inheritance or other windfall, or make a large bet with a very large payout (lottery, casino, etc.). The last two are probably the simplest. If you are able to secure some large payout and not splurge on a new Ferrari, you can invest all of those earnings and follow the 4% rule for retirement. Graduating from college with a high paying job and saving enough so that you could depend on your savings alone is a much more difficult task. FI Journey uses the following chart to show how long it would take to become financially independent while starting with a $60k salary and saving 50% of that:
As you can see, it would still take 12 years to reach this point. You either have to reduce your expenses to very small amounts or have a huge starting salary.
Running the Marathon to Financial Independence
Most people run the marathon to FI, which in most cases is known as retirement. They spend 30-40 years working in the corporate world, saving in their 401ks an IRAs. If they’re lucky enough, they’ll even have a pension waiting at the end of the rainbow. By using the power of compound interest, people contribute a little bit of money each year and hopefully have a much bigger nest egg when they start to withdraw money. Obviously, this takes time and most people simply want the “get rich quick” scheme.
Starting a Business
One of the easiest ways to become financially independent is to start your own business. Granted, it is only the easiest if you are able to start a successful business that generates a profit, something that takes most start-ups several years and about 40% of high-potential startups ultimately fail. Are you one of the lucky few?