The Formula to Financial Independence

Financial Independence is everywhere at the moment – in the news, podcasts, blogs! Its great to see that its become easily accessible for everyone that’s even the slightest bit interested.

I’ve decided to breakdown the formula to follow for Financial Independence. I doubt it will be anything original but since this is a Financial Independence blog, its only fitting that it has some resources right!

Financial Independence in its simplest form.

The basics of Financial Independence is that you want to live well without having to go to work for it, right? The basic formula for this is easy:

In even simpler terms, when money starts coming in without you having to do all that much and its more than you need to live on then you’ve reached Financial Independence. Sounds easy right? So how do we get there?


How do you want your life to be when you retire? If it involves holidays every month and a Bugatti – then your going to really need to increase your passive income. For most of us, our ideal is being able to pay the bills (and have the heating on when your cold) putting food on the table and having some cash leftover for the fun things in life.

The first step is to know how much your currently spending each month. Its great to write this all down (pen and paper or a fancy spreadsheet will both do) Naturally the less you need to live on, the faster you will reach Financial Independence, since you don’t need to generate an impossible level of passive income.

Once you know how much you currently spend, its good to look at if this can be reduced. Simple things like looking for cheaper home insurance can help bring the figure down a little. Some Financial Independence fanatics go as far as frugality and aim to reduce their expenses to the lowest level. This is a personal choice.

For us, we are looking at paying our mortgage down first, since this is a huge monthly expense. Its important to remember that you set the limits for this. You can live as comfortably as you wish and this looks differently for everyone.

Obviously if you live on the bare bones of your expenses then you can speed up your FI route since you can invest more. This works well for some people since you can increase your lifestyle after FI has been reached.

There are multiple parts to figuring out reducing the living expenses from looking at your mode of transport, to where you live and even your money mindset.

Passive Income

The sky is the limit on this one. You can earn as much as you want to! The aim is to generate more income so that you can invest it and then live of the returns. The key here is the more you make the faster you can begin investing it. There are rather complicated rules to knowing how much to invest (such as the 4% rule) that I’m not going to cover here today. Lets get the basics down first!

There are a multitude of options on how to increase your income – Earn more through your current job, side hustles, businesses and getting a second (or third) job. The choice is your how you reach it.


I haven’t ever invested in anything stock related so I’m not going to be dishing out advice just yet. There are lots of options for the investing stage and its well worth researching and really stocking up on everything there is to know before you take the plunge.

Let me know what you think.

Where are you up to on the FIRE journey?

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