Many financial independence bloggers talk about saving 20-30 multiples of your annual budget (expenses) to become financially independent and retire early.
However, the final number for that calculation can be pretty daunting for many people, especially if you didn’t think about retirement in your 20s or 30s and have to start from zero. Furthermore, saving 20-30 times the yearly budget to retire early may not be possible for everyone.
The financial freedom bloggers talk a lot about cutting down spending (beneficial for both financial independence and the planet) and living comfortably without feeling deprived. Even though I support that concept wholeheartedly, I’m also realistic. I know that life happens, expenses pop up, and dipping into your savings for many may be the only way to cover them. Moving to areas with a lower cost of living is a great idea, and I’m all for it, but not everyone’s job is flexible enough to allow it, and often jobs keep people in expensive areas, even though those jobs may not pay much.
There is also the issue of salaries being area-bound, and in lower-cost areas, the same jobs pay less. Of course, city living is more costly than small-town living, but if you earn less, it may even out. Then, if you live in a commuter town and commute to the city for work, travelling either by car or public transport can significantly add up and eat into your savings and investments. These two elements, cutting down on spending and living in low-cost places, are the core of the financial independence movement.
I began my journey towards financial independence two years ago (during the first national British lockdown). I quickly realised that cutting down on my expenses was one of the most critical elements to get me started on my journey towards financial freedom.
Adjusting my yearly budget over the years, discovering my real needs and what I can live without (deprivations are never the answer in the long run) has worked for me. However, I’m still very mindful of my family’s monthly budget and keep an eye on it because if I don’t, it can quickly go out of control. Cutting all expenses cold turkey may work for some people, but most will struggle with it and rebound quickly.
Having specified goals for why I want to become financially free has been the driving force behind my actions. If your goals are vague, such as “I want to retire early because it sounds like fun,” you will likely struggle to reach the finish line. However, if you have a specific goal in mind, say: “I’m saving up to build a tiny house that could give me financial freedom and independence from having a mortgage”, then your goal is clear, and you can set the plan you need to follow to make it happen.
If part of your financial independence plan is to build and live in a tiny house, seeing that materialise in front of your eyes can be much more stimulating than putting money towards your employer’s retirement scheme or investment portfolio. Not “seeing” where your investments are going might, for some people, feel like walking through the darkness without knowing where or when the exit is.
In recent years, the tiny house movement has become increasingly popular and has served as a major stepping stone toward financial freedom and independence for many people worldwide. The global property market has been on steroids for a long time, pricing many people out of their areas and making it impossible for others to move or get onto the property ladder. However, the tiny house movement champions small, often portable homes that can be transported (houses on wheels or container houses) and put on someone else’s land for a fraction of what a traditional mortgage would cost.
The current housing system is set up to lock people into 30 + years of mortgage payments. Just imagine that you pay £1000 each month for your mortgage; that means you have to earn that £1000 each month just to make the payment, regardless of whether you like your job or not and whether you are healthy enough to carry on with your job. That £1000 payment doesn’t include bills, which are currently skyrocketing all around. The property you purchased at 30 will be yours in 30+ years; of course, you can sell it in the meantime and make a bit of profit, but most likely that profit will be used to purchase another property with an even larger mortgage.
What if, instead of saving up deposit money for your property, you build a tiny house on wheels, which you can take with you everywhere you go? This way, you won’t be tied down to a 30-year mortgage and one place. That £1000 may well be enough to cover all your living expenses, not only your mortgage payment.
Now, imagine that the land your tiny house sits on offers you enough space to grow your garden. Of course, not all climates allow year-round harvests, but even small plots of land, if well managed, might let gardeners grow enough fruits and veggies to live off the land during the spring/summer months and make enough preserves to last over the wintertime (this is how my granny’s household was run).
The tiny houses often champion the use of new green technologies and many salvaged materials, which is a clever way to keep costs down and keep good materials out of landfill. All new technologies will have upfront costs, but in exchange, they offer greater resilience against events such as the world’s crises (many different ones, including environmental ones), political upheavals, and global market crashes.
Tiny houses, off-grid living, and growing your own food are excellent ways to become financially independent. Besides, tiny houses are, by nature, small, which in turn limits clutter, freeing up finances and helping the environment. Keeping 20-30 times your yearly budget invested may simply not be on the cards for many people. If you want/plan to become financially independent but feel that saving and investing such vast amounts of money isn’t for you, look into the tiny houses movement and grow your own food. Those two concepts need initial investments but will keep paying off for years.
PS. I’m #MadeByDyslexia – expect big thinking & small typos.
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