Financial Independence At 22
What is financial independence?
Wikipedia defines it here: “Financial independence is the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income and/or cash flow from dipping into the assets that is at least as great as their expenses.”
Wanna know how I got here? Alright, let’s do this thing.
Growing up, I had always been lazy. I hated schoolwork and told my parents all the time that I wanted to drop the honors and AP classes they made me take. They also made me get a real job the day I turned 15(I know, how terrible). This was the earliest we were allowed to begin working in Delaware. Naturally, for the sake of laziness, I got my lifeguarding certification and was off to the pool for the summer.
Turns out I was a natural penny pincher. I loved getting that paycheck and seeing the numbers increase in the joint checking account my parents had helped me set up. Eventually, that minimum wage lifeguarding gig wasn’t cutting it for me anymore. I ended up jumping ship to go chase the big bucks; $10/hr doing manual labor for an equipment and party rental company.
But that’s when I came to a lazy realization: “Man this job blows! Maybe I should actually give school a shot because sitting at a desk for the rest of my life in the AC must be great compared to this manual labor in 95 degrees.”
Fast forward 3 years or so and I’m sitting at a desk in the AC just like I had dreamed. I had just finished my junior year of college and landed my first big boy internship making $20/hr for the Summer. Since I was lazy and had dreams of landing in a cubicle, I had worked VERY hard for my B average at an average university majoring in Computer Science. The first month of cube life everything was fun and exciting. I couldn’t believe I had tricked this Fortune 100 company into hiring me, a lazy B student.
But then month 2 comes around. I had been successfully brown nosing and tricking people into thinking I was a decent programmer(I’m still not). But I was coming to another sudden lazy realization: “Man this job blows! I need to figure out better ways to earn money so I don’t need a job. Then I can be lazy forever!”
My love for personal finance, investing, and passive income was born.
Where I’m At Today
Fast forward about a year and a half: I’ve graduated college with a 2.9 GPA and landed myself a decent 62k/year gig at a Fortune 10 company this time. I truly don’t understand why these companies keep hiring a subpar candidate like myself, but oh well!
Alright so about this financial independence thing. I had spent the last of couple years reading and learning about the idea from others who were trying to accomplish it or already had. Simply put, in my words(and probably many others), financial independence is when your passive income is greater than your necessary living expenses. You may have previously heard of financial freedom; when your passive income is greater than ALL your living expenses, which includes fun costs and whatever else you want to do. I still work in my cube because financial freedom is what I’m chasing, but having reached financial independence is an exciting start nonetheless!
Let’s talk specifics. My necessary monthly living expenses include the following:
- Student loans
- Property taxes
- HOA dues
- Property insurance
- Car insurance
- Phone bill
- Electric bill
- Water bill
- Internet bill
- Misc(A repair or something always seems to come up, costing me and average of $50/mo.)
These expenses, according to my mint account(great budgeting tool, highly recommend), come to be about $991 each month. As you can see, frugality is a huge part of my financial independence.
My Passive Income
My passive income stream of choice to combat this number has been rental properties. I’ll preach real estate some other time, but this investment vehicle has just allowed me to reach about $1100 in net passive income. This means after my 9 grueling months in the workforce since graduation, I can quit my job now and coast for the next 60+ years of my retirement! I’m joking of course since I don’t expect to maintain a lifestyle forever that only costs me $991 a month. But that’s why I’ll keep working in my cubicle while leveraging that salary to build more streams of passive income.
I think an alternative mindset in the way we approach financial independence and retirement could help millions to live a more fulfilling life. Work on building passive income streams now so that we don’t have to sit in that dusty old cubicle until we’re 60 years old. If a lazy, below average student(with loan debt) like me can do it, so can you.