What is Financial Independence?


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Financial independence or FI (pronounced eff-i) as it is usually called refers to the idea that a person has sufficient wealth to not need to work. FI does not mean that you have to retire, but if you do, then you are FIREd - Financially Independent and Retired Early (pronounced fired).
But that's not the only possibility - there are various levels of FI, some of which are:
  • CoastFI: You have enough money to coast - that is, if you were to invest no more starting today, your current investments will still be sufficient (with whatever growth they will see between today and then) for you to retire when you are nearing traditional retirement age - notionally considered to be 60 years of age.
  • BaristaFI: You have enough money to keep yourself at a job that pays for some of your day-to-day expenses and you withdraw the shortfall from your investments.
There are also 3 broad categories of FIRE that have come from the American FIRE community and are quite well-known (but there are no universally accepted Indian definitions yet):
  • LeanFIRE: FIRE with an emphasis on minimal spending, often combined with minimalism
  • FIRE: Regular FIRE that doesn’t seek to overly minimise or inflate expenses in FIRE
  • FatFIRE: FIRE with very high planned expenses.

Why should you care about FI?

Retiring early (RE) is not the only end-goal of FI, it's just one of the possibilities. Many people choose to continue their work/business even after they are reasonably FI. Some people switch their jobs to less stressful ones. Some retire from their current professions and take up old/new passions. Some may be inspired to start working on their business ideas that have long lingered in their minds, but couldn't be implemented when having a 9-5 job. The possibilities are limited only by you.

FI is just an enabler for you to do what you’d want to do if earning money were not the only objective.

Last modified 8mo ago