Fundamentaly, Financial Independence (or “FI“) is about freedom. Financial independence means that you have reached a certain level of financial control. Within the Financial Independence, Retire Early (or “FIRE” movement), Financial Independence means that you have enough money coming from investments (like shares/stock, or real estate) to cover all of your living costs without working again or investing any further amounts.

How do I know if I have enough money invested?

There’s a general guide within the FIRE community of using “the 4% rule”. Of course, this general guide / rule of thumb is helpful, but you need to remember that, whilst it can be seen as an indicator of your FIRE number, it is a rule of thumb. There are a lot of variables (underlying assumptions of the underlying “Trinity Study”, which the 4% rule is based on; types of assets that you’re invested in; etc). However, it’s a great place to start.

What is the 4% rule?

The 4% rule is that, once you have have invested the equivalent of 25 times your annual living expenses, you should be able to withdraw 4% of your invested amount each year to live on for up to 30 years.

What’s the catch?

It’s a rule of thumb only