Things to consider on your financial independence journey

It’s been 15 years since we started our financial independence journey. I will be the first one to admit that my mentality toward money and life has evolved over those past 15 years. I truly believe my mentality change has been overall positive.  

You probably have read or heard about people who retired early in their 30s. They certainly get a lot of media attention. I believe these early retirees get the media attention because they are so outside the norm. There are plenty of people who retire early – retiring before they are 65 but do not get much attention or media coverage. 

But that’s totally OK. It’s not about getting your fifteen minutes of fame. It’s all about creating a life and having a lifestyle that you love and having financial stability that will last a lifetime (and potentially future generations if you desire). 

As I look back at our financial independence journey so far, I realize there are so many things I have learned over the years and there are so many things I wish I had considered when we firststarted. 

Things to consider on your financial independence journey

1. Saving money vs. enjoying life

Saving money and spending money are two sides of the same coin. Early on in our financial independence journey, I was very much focused on saving money. I would avoid enjoying the simple things of life, even if they only cost a few dollars. I didn’t know or understand that both saving money and enjoying life are both equally important and in fact, interdependent. 

It’s vital to enjoy life while you can – spending money to generate lasting memories. The key is not to overspend. It’s totally OK to allocate a portion of your income for guilt-free spending and/or vacationing and seeing the world. Exploring Europe in your 20s and 30s with your friends or significant other is a completely different experience than exploring Europe in your 40s and 50s with your kids. 

It’s all about finding the right personal balance. If you enjoy eating out and it brings you a tremendous amount of joy, spend the money! But if you don’t enjoy eating out and eating out causes anxiety for you, then don’t spend the money! On the other hand, if you enjoy travelling and can’t live without it, spend the money! But if you are the type of person who dreads getting on a plane and flying for an extended period of time and would rather spend the time and money on something else, that’s totally OK too. 

The key is finding things that will allow you to enjoy your life and spend the money on those things. Then ruthlessly cut expenses on things that you don’t enjoy.

And what’s important to you will change over time too!

When we started our financial independence journey, we enjoyed going to a cafe to have coffee and baked goods. We also enjoy dining out frequently. Over the last few years, our preferences have changed greatly. Instead of going to a cafe or eating out, we would rather spend time at home making our own coffee and food. We realized that we still enjoy travelling and spending time on our hobbies, so we spend money on those activities instead.  

2. Increase your income instead of cutting expenses 

We focused on cutting our expenses in the first couple of years of our financial independence journey. Yes, these cuts helped us to increase our savings rate and we discovered we had some unnecessary expenses that could be trimmed or eliminated. Eventually, we realized that we couldn’t cut our expenses further. With the arrival of Kid 1.0 (or Baby 1.0 back then), we had to spend a bit more money on our small family. 

What I didn’t realize when we first started our financial independence journey was that you can only cut and optimize your expenses so much. If you try to reduce your expenses too much, you will end up having a poor quality of life and depriving yourself. If you let this poor experience drag on, you will give up the FI journey and hate the FIRE movement.

Rather, focus on increasing your income instead. Negotiate your income with your employer, earn extra income through side hustles, and learn new skills to increase your earning power.

3. Don’t be afraid to ask

I am naturally shy, so I never liked asking for favours. However, after listening to Jia Jiang’s talk about his experience with 100 days of rejection and how he beat the fear, pain, and shame that rejection often brings, I realized that I needed to change. 

I learned that people can’t read my mind about what I want. If I don’t ask for it, I won’t get it. The only fear I needed to get over was getting rejected. But is it so bad to get a no? It’s far worse to stay silent, never ask, and have regrets for a very long time. 

It’s quite fascinating what happens when you start asking the difficult questions – asking for a raise, asking for a higher hourly rate on side hustles, asking for a hotel room upgrade, etc.

I wish I had asked for more pay when I graduated from university and started my first job; I wish I had asked for a raise a few years earlier, instead of keep waiting for the right time (there’s never a right time), I wish I had asked for the “financial advisor” at the bank earlier about mutual fund fees, I wish I had asked my bank about lowering my fees, etc.

If you don’t ask, you won’t get it. Even if you get a no for the answer, at least your question will be on their mind. 

4. Stay consistent 

The financial independence journey is not a sprint, it’s a marathon. It is easy to give up on the journey after a few years or when you don’t really see much progress. 

The thing is, progress is extremely slow in the first five years of the journey! As you may have heard, the first $100k is the hardest. It takes a lot of time and effort to hit the $100k milestone. After that, the progress starts to compound quickly. It may take you five years to get to the $100k milestone but only three years to get to the $500k milestone. It’s like rolling a snowball down a hill. At first, the snowball is pretty small and going pretty slowly. As it rolls down the hill and picks up more snow, it becomes bigger and starts gaining speed. The size and speed quickly compound as the snowball gets bigger and bigger. 

That’s why staying consistent is extremely important. Have a key investing strategy that would allow you to stay invested for the long term. For us, that was dividend growth investing. Sure, we have made some mistakes, like buying high-yield dividend stocks or not understanding the importance of the payout ratio. But by having dividend growth investing as our key investing strategy, we have been able to hold high-quality stocks for a very long time and let them compound over time. 

Feeling bored? Feeling impatient about your progress? In a financial marathon, it’s easy to feel that way. But these are the most dangerous feelings, because when people get bored or feel impatient, that’s when they do something stupid – invest in something riskier, sell on downturns, change investing strategies. 

Consistency is the key! 

5. Don’t over-optimize – some inefficiency is OK 

Optimization is one of the key components to financial independence retire early (FIRE). Optimize your savings and spending, optimize your savings rate, optimize your investments, optimize how much you pay on fees, optimize credit card rewards, optimize your life, and the list goes on. 

When we started our FI journey, Mrs. T and I spent a lot of time optimizing our lives. We tried to optimize our savings by reducing monthly bills, reviewing budgets, avoiding dining out, tracking spending, avoiding unnecessary expenses, avoiding buying new stuff (even when it was necessary), putting off trips, eating leftovers for days, etc.

Over time, we realized that some level of optimization is healthy and good. But over-optimization is detrimental to our overall well-being. As our investment portfolio and net worth got larger, we realized that optimization is not always possible, and some level of inefficiency will creep in. Such is life, there’s no way around it.   

When you first start the FI journey, perhaps it makes sense to optimize how you shop to save $20. For example, it may make sense to drive for 10 minutes so you can save $20 on gas. But as your earning power and your net worth increase, it may not be worth it to save $20 on gas. Your time and life energy are worth more than $20. The same thing applies to saving money on groceries. Price matching and finding the cheapest deals may make sense early on the FI journey but spending hours on finding the cheapest deals and price matching to optimize grocery spending and save $20 may not make sense when you have a million dollar net worth. 

What to optimize and what not to optimize is entirely up to you and it’s a very personal decision. Ultimately, you are going to find a situation where you are faced with diminishing returns. The effort required to achieve further optimization will yield diminishing returns. You need to decide whether optimization makes sense or if you are OK living with some level of inefficiency. 

Summary – Things to consider on your financial independence journey 

It’s pretty amazing that we have been on the financial independence journey for 15 years. Many things have changed or evolved over the last 15 years. Although we’re getting closer and closer to FI and retiring early, we are not in a rush to get there. I also realize that as we move forward on our FI/FIRE journey, more evolutions will happen. Rather than avoiding these changes and evolutions, we need to learn how to embrace them. After all, life isn’t static. If it were, it wouldn’t be all that much fun! 

Are there any other things we should consider on the financial independence journey?