Is financial independence possible?

Whether it is sleeping in on Monday, taking a month to travel, or doing work that feeds your heart more than your wallet, having the ability to choose what you do and when you do it is a luxury many people can only dream about. Depending on your situation, it may be more attainable than it first appears if you are willing to make a few trade-offs along the way.

The “FIRE” movement (Financial Independence, Retire Early) focuses on the value of aggressive saving and prudent investing with the goal of building financial independence. While some people aim to retire earlier, others may be more focused on having greater choice and flexibility in how they live and work.

Below are three examples of people working towards financial independence. The common denominator: Each has made some lifestyle compromises in the short term in order to achieve financial independence and is navigating FIRE within their relationships. 

Short-term sacrifices for long-term goals 

Bridget Dunn's path toward financial independence started early in her career. She was firmly on the savings path before she and her husband got married—having aggressively paid down student loans.

Although they are not planning to retire early, both are motivated by having more options in the future. They share similar financial goals and accomplish them as a team.

"The big thing we started together was when we decided to get our MBAs [Master of Business Administration]. We did evening MBA programmes and we decided going in that we were going to pay cash, not use loans," Bridget says.

"We weren't zealots about it, but it did help that we were on the same page. Could we have lived in a nicer apartment and closer to the city? Sure. But it was really important to both of us that we were able to pay for school," she explains.

The couple shares a car that is paid off, and it did not make financial sense for them to buy a new one yet. And they eloped instead of having a large wedding ceremony. "It was nice to be able to have a fun day that was about us that also didn't end up destroying our financial goals," Bridget says.

Besides their 30-year mortgage, they are completely debt-free. Though they have made some lifestyle adjustments to get to this point, it does not feel like a sacrifice. Skipping restaurants and cooking meals at home and getting books at the library instead of buying them new are just a couple of examples. "It's more about thinking creatively about how we can access an experience or item at a slightly lower cost," Bridget says. 

Retired at age 44 to pursue her passions  

Ramat Oyetunji describes her early experiences with investing as an important learning point in her financial journey. After a period of job loss, she returned to school to earn a Master’s degree and began saving small amounts regularly. She used that money to start investing for the long term.

This habit accumulated more savings and helped set Ramat up for success later on. "I drove my old car for the longest time. I started saving more as soon as I could contribute to my [workplace retirement plan], and before that, I at least contributed to an investment account—putting money away bit by bit," she says.  

She later married and explored different investment approaches, including property. At one point, she and her family chose to purchase a dual living property, where they lived in part of the property while renting out the other portion. The rent helped create passive income. Later, she invested in other properties, which also helped support their financial goals.  

Her husband is not as enthusiastic about FIRE, but they agree on their joint financial goals. Ramat manages her own money and their joint household funds, while her husband manages his own money.

She eventually started her own company that focuses on teaching women about finances. "Financial independence is important for everyone, but for women especially, it gives you options— for example, the option to walk away from a bad relationship or a bad situation," Ramat says.

Though she made trade-offs along the way, "I have not felt they were sacrifices because I value having financial freedom and spending on things that are important to me," she says. 

Working towards a future with less financial stress   

MaryAnn¹ and her husband are focused on building financial independence to support a future lifestyle, rather than targeting a specific retirement date.

Many FIRE participants have a specific amount they aim for before embarking on their next adventure, but MaryAnn and her husband are in it for a future lifestyle. "We don't have a date or a number, but more of a life that we see for ourselves. I want my husband to find a job where he can feel fulfilled and not worry about the finances," MaryAnn says.

MaryAnn works as a wedding photographer, so her income varies, while her husband holds a salaried position. She and her husband are on the same page about their short- and long-term goals, and their savings come out of his paycheque.

"It goes to three places, so one-third to taxes, one-third to retirement and investment accounts, and then one-third goes to a [current] account for our spending, bills, and mortgage," MaryAnn explains.

Her income is kept in cash and used for big purchases, like house renovations, and for extras like travel and restaurants. At year-end, the money that is not spent goes into their investments.

When it comes to investing, they do have tax-advantaged accounts like personal or workplace retirement savings accounts. They also have property investments. The couple is debt-free except for their mortgage. For now, it makes more sense for them to invest their money rather than pay off their low-interest loan.

"We could spend more on fancier cars, nicer clothing, etc., but we feel like none of that will make us any happier. To us, having security and future freedom is way more valuable than having nicer stuff," MaryAnn says. 

Five considerations from people pursuing financial independence   

1. Take advantage of workplace benefits. Bridget says, "I think a lot of people just don't understand the benefits they might have. If you have benefits available, it's important to really understand them in order to maximise them." For instance, even if you are automatically enrolled in your employer's workplace retirement savings plan, it may be set at a contribution level that could miss part of a potential employer match, which is essentially free money. You may need to actively increase your contribution to get the entire match (if applicable).
    
2. Make a detailed budget. "You have to be detailed, you can't be wishy washy—you are not going to manufacture money," Ramat laughs. "My fun money has been 200 a month, 50 a week for years. Everything is allocated to something else," she says. Some people find it useful to track spending and allocate money towards specific priorities. A clear plan may help identify opportunities to save.
    
3. Set goals. "Having a goal in mind helps you stick with it," MaryAnn says. Whether it relates to lifestyle, savings, or flexibility, goals can help maintain motivation over time.
    
4. Be aware of lifestyle creep. "We used to make a quarter of what we earn now, but we were fine and it was comfortable. But that bar seems to go up as our income does. It's something I try to be conscious of—when is it enough?" MaryAnn says. As income grows, spending can also increase. Being mindful of this over time may help maintain balance between current lifestyle and future plans.
    
5. Consider automation. "Our savings come out of the pay cheque automatically; we don't get used to having it, and we just never even see it. So, it is not even part of our daily awareness,” says MaryAnn. Automating saving or investing, where available, may help make the process more consistent and easier to maintain.