this is what financial independence feels like

What Does Financial Independence (FI) Exactly Mean?

woman with arms open since she reached financial independence

So, you are already pretty darn good at money!

You have no debt, have an emergency fund, make good money, and invest in your retirement!

But then you wonder, is there any more you can do?  

You are online, and you come across some terms that you have never heard of before!

Financial Independence. FI. Financial Independence Retire Early. FIRE.

It sounds intriguing! 

Is this your next step?

In short, Financial Independence (FI) is a framework that introduces a new way of thinking and a new way of living.

It is crafting a lifestyle with financial flexibility in mind so that you do not need to accept the conventional idea of traditional retirement.  

Is Financial Independence (FI) for you? 

Let me walk you through Financial Independence/Financial Independence Retire Early (FI/FIRE).

What does FI/FIRE mean?

putting money away to reach financial independence

Financial Independence (FI) is building up a significant net worth so that you can quit your job and retire early if you want to. 

You live off the nest egg you have built by withdrawing a small amount from it each year, passive income, or side hustles.  

FI is not black and white, and much like how personal finance is personal, the journey to FI is also unique. 

Each family determines its own financial goals, values, and lifestyle.

Financial Independence Retire Early (FIRE) is the same as FI, but you intend to retire early and not work again.  

Here’s the most exciting part! 

You can be FI without being RE!  

The principle of FI/FIRE is to build a big enough safety net and create financial flexibility so that you can:

family on a walk since they reached financial independence
  • Quit a job that you hate
  • Travel for a month at a time with your family
  • Rent an RV and visit all 50 states without having to work
  • Experience life with your kids through traveling to different countries/states
  • Have a vacation home that you can rent out and live out of for half the year 

Paula Pant from Afford Anything defines FI as the point at which your potential passive income is enough.  

Only you can decide how much is enough to have a life that you love sooner than later.  

Sam from Financial Samurai defines FI as when your investment income can cover your desired living expenses. 

What is the FI Number? 

stack of money in a case

The FI number is the amount of net worth you need to have before being Financially Independent. 

Ideally, the money should last you your entire life without having to work again.

The general consensus of the FI number is having a net worth of 25x your annual spending.  

If your yearly expenses is $80,000 x 25 = 2,000,000 (FI number)

However, the FI number is truly subjective.  

Your annual spending changes throughout your lifetime. 

People put too much stake on their FI number at the exact moment when they learned about FI/FIRE. 

Goals and lifestyles drastically change from your 20s to your 30s to your 40s, and so on.  

In my 20s, I spent money on monthly massages and lived in tiny rooms whenever I traveled. 

Now that I’m in my 30s with kids, we only stay in places that have a kitchen. 

When I reach my 40s, I’ll be in the sandwich generation, taking care of my aging parents while raising my own children.

Our FI number is roughly $2,000,000. However, it’s not set in stone, and we don’t focus on the number itself. 

Related Post: 9 Personal Finance Numbers to Master

Different types of Financial Independence (FI) terminology:

When I first heard of FI in 2018, it was FI or FIRE. But there are more definitions now. Don’t get stuck on the definition itself. 

You decide how you want to live your life and what kind of FI journey is for you.  

Fat FIRE:  Reaching FI and spending more than the average person.  

woman shopping since she is financially independent

You can maintain your lifestyle while still spending money on luxury items without having to be frugal.  

A typical Fat FIRE income is living off of $100,000/year. 

Lean FIRE:  Reaching FI and living on a “lean budget.”  

You make choices out of frugality and have a low expense lifestyle. You can reach FI more quickly since you need less money to live off of.  

A typical Lean FIRE income is living off of $40,000/year.  

Coast FIRE:  Having enough money invested right now so that you can “coast” to FI without investing another cent. 

You depend on the compounding growth of your investments to ensure that you are on track to reach your FI number without further contribution. 

Barista FIRE:  Working part-time to have insurance through an employer and receive income to supplement your current lifestyle.  

barista FI

You do not meet your entire FI number but can comfortably reduce your working hours or take on a less stressful job.   

Other terms to describe people in the FI/FIRE movement:

DINK: Dual income, no kids

SINK: single income, no kids

DIK: double income kids 

SIK: single income kids 

Why is Financial Independence (FI) important?

freedom written on the wall

Financial Independence offers you choices on how to live your life instead of being a servant to your employer until retirement age.  

FI emphasizes having the financial freedom to leave a toxic environment or pursue a career that you are genuinely passionate about.  You can actually do it regardless of the salary.

It allows you to live the life you want now instead of waiting until retirement age to live the life you have always dreamed of.

How to achieve Financial Independence (FI)?

someone holding a lot of money

The essential key to achieving Financial Independence is paying attention to how much you make, how much you spend, and how much you save.

The more you save, the more you make, and the less you spend = Financial Independence


  • Identify your savings rate.
    • Many people recommend saving 10-20% of your paycheck. However, that is not enough. 
    • If you want to become FI sooner, you should save upwards of 40%+. 
    • Decide how to balance your savings rate while maintaining a good quality of life.
  • Challenge yourself to look for ways to save in your everyday life. 
  • With the amount you save, invest your money instead.
    • Look at retirement accounts that you can invest in through your employer, Roth IRA if you meet the income limits, brokerage accounts, Health Savings Plan (HSA), etc.
    • Understanding how compound interests works will motivate you to invest more right now


meeting financial independence by making more money through creating different income streams
  • The more income you have, the more money you can potentially save and invest.
  • Look for ways to increase your income.
    • Get a new job, ask for raises and negotiate salaries 
  • Create multiple income streams.
    • Have a side hustle and create different avenues for passive income 
  • Learn about your career trajectory. 
    • How much more can you potentially make, and what do you have to do to get there


  • Having a budget will make you aware of your spending.
  • Master self-control, disciple, and live below your means.  
  • Identify things you value and spend money on those things. Cut back on other areas that do not bring you value.

Related Post: Purpose of Budgeting and How to Use It to Your Advantage

What does Financial Independence (FI) mean to us?

family is financially independent and walking in the field

We have been on the FI journey since 2018 and have formed our own meaning of FI. 

Our ultimate goal is to be happy and enjoy life now with our young children while saving and investing in our future selves.  

For us, FI means:

  • Investing in ourselves: 
    • Saving for retirement 
    • Saving for a house down payment 
    • Living within our means so that we can continue to be a single income family 
  • Enjoying time with our kids now: 
    • Going on family vacations 3-4x a year 
    • Spending more time with extended family 
  • Building generational wealth: 
    • Saving for our kid’s college

Related Post: 7 Things Families Pursuing Financial Independence Do Differently

Is FI/FIRE possible for people that don’t make 6 figures? 

family on the journey to become financially independent


We make a modest income of $80,000 as a family of 4 (soon to be 5), with only one parent working.  I have no doubts that we will reach FI.

When you first learn about FI, you are willing to cut down your family’s lifestyle just to retire at an early, impressionable age. 

However, the lifestyle will not be sustainable or realistic.

It took me months to accept that with our income level, we can’t reach the standard term of FI in our 40s/50s. 

I had to be flexible and realistic about my expectations of FI.

When you don’t make a 6 figure income, you need to be flexible and adjust your expectations. 

Identify what matters and what doesn’t. This all makes a difference in your FI/FIRE plan. 

So what’s my point?

Your FI journey is unique to you.  No one will have the same priorities, values, and goals as you.  

Everyone can have the same goal, but the journey is different.

Related Post: Financial Independence is for Everyone: Including Military Enlisted Families


family on the beach enjoying financial independence

FI/FIRE gives you the financial flexibility of creating a life you love now instead of waiting until retirement to enjoy life.  

Imagine being able to leave a toxic work environment that doesn’t serve you.

Imagine being able to spend time with your kids because you don’t need to work.

Imagine taking a less-paying job that aligns with your passions and beliefs and gives you purpose.

You are that weird person because you don’t give in to societal norms.  

Instead, you want more for yourself and your family and not the traditional way of living.

Financial Independence is a journey that takes years to achieve. 

It becomes your own no matter what the numbers say or what kind of FI person you are. 

Create your own Financial Independence journey!

You can do it!

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