One of my personal financial goals is to become financially independent. For those unfamiliar with the term, I define financial independence as follows: A state in which financial assets generate sufficient income to pay for a chosen lifestyle. In layman’s terms: More assets = good, combined with fewer expenses = better.
Financial Independence = Passive Income Generated by Assets > Expenses
I am seeking financial independence so that I will have the freedom to walk away from my current or future job should I need or want to in the future. One example of when I would potentially want to walk away from my job: My spouse and I have a baby and we decide that my staying home with the child is our preferred option for care taking. While I absolutely love my job and my career, financial independence allows for many options in the future that being tied to a 9 to 5 does not.
One key step in achieving financial independence is increasing investment and savings rates. Not only does this increase the amount of assets you have working for you by generating passive income, but you decrease your expenses, thereby accelerating the journey to financial independence.
I’m going to start tracking my investment and savings rate on this site, starting with August 2016. My investment+savings rate is based on my *gross* income. Also, I’m including in gross income my employer’s 401(k) contribution, as they give me a portion of my salary each month. This isn’t a match, but a contribution to my 401(k), so I view it as income and include it in my gross income so that my savings+investment rate isn’t disproportionately inflated by this contribution.
August 2016: 40.29%