Most of those that visit my blog are working towards a specific end goal, I know I am. That goal for the majority of us is financial independence. Financial independence can mean different things to different people. To me financial independence is the ability to have enough passive income coming in to cover your monthly expenses. This opens up your options which is what we all want. To not be a slave to the office because we have to.
Passive income can come from a variety of places such as rental real estate, interest on cash, you can set up target websites to profit from web traffic/advertising, write and sell an e-book, P2P lending, my personal favorite dividend growth investing, and many other possibilities. There's plenty of other passive income opportunities with a varying degree of passivity. Most passive income sources require a large amount of initial work and then you get to reap the rewards over time. The reason that dividend growth investing resonates with me is that it provides a reliable source of income that will grow over time. Some passive income sources, e-books for one, don't provide the important factor of growth. They usually have an initially high income that tails off, but that's not the case with dividend growth investing. If you select your companies properly they will continue to grow over the long term and you can reasonably expect your dividend checks to grow year in and year out like clockwork.
Anyways, back to the topic at hand. After you've decided which one(s) you'll use and put in the hard work to spend less than you earn and invest the difference, eventually you'll reach that magical crossover point. That's the point that your passive income is now higher than your expenses. Congrats! You're financially independent.
Of course now you have options. You can flat out retire if you choose to do so. Or you can continue to work at your current job or even decide to change career paths, possibly to something that is more rewarding to you emotionally even if the financial rewards aren't there. You can go bum around on the beach 24/7 if that's what you want to do. You can finally devote time to those hobbies you never got around to learning. Spend a lot more time with family and friends. As you can see the opportunities are essentially limited to your imagination.
I have two options as far as I'm concerned.. Option 1 has me working until I reach full financial independence, with plenty of margin of safety of course, and then retiring early. At that point I'll continue to blog/write to earn a bit of extra income but replace a lot of my days with time with family and hobbies. There's so many things that I want to learn and explore but unfortunately I just don't have time for right now. Things like woodworking, digital photography, wilderness survival skills, a road trip around the United States, and the list could go on and on.
Option 2 is a bit different route but leads to the same result. My other option would be to work until I've partially reached financial independence and then take a lower paying job that allows us to just continually reinvest the dividends we receive and save a little extra. Obviously this route would take longer to reach financial independence but it would allow me to slow down the pace of life earlier. I currently work a job where I'm constantly on the go and it requires me to be out of town, and away from family, for a couple weeks at a time. I really enjoy the job but the schedule, or lack thereof, is what's the hardest part. By switching careers and taking a lower paying job I could reclaim more of my time earlier but it would take a bit longer to become truly financially independent.
Based on my crossover point spreadsheet I'd still need to work another 9 years to reach my crossover point or 10 years to factor in a 15% margin of safety. Although this calculator doesn't factor in being able to tap into my retirement accounts at all which there are ways to do that before your typical retirement age, but I'm not sure what kind of monthly cash flow I could expect to receive from those. The calculator also doesn't factor in that I could most likely increase my income from my blog and writing on Seeking Alpha. In 2014 I earned almost $1,400 and I know with more time dedicated to both of these I could ramp up my focus on both of these potential sources of income that could help make up some of the gap. If in the meantime I could bump those numbers up to at least $2,500 this year I'd be more confident in my ability to generate income online and potentially hit a modified FI. My wife also has no intentions of quitting her job forever barring the health and needs of our son. With her continuing to work we would be much more secure financially.
Option 1 would be the quickest route to true financial independence. One bonus with Option 1 is that it would allow us to pay off our mortgage which decreases the amount of monthly passive income we need by $900. However, Option 2 would allow me to enjoy some of my post financial independence plans while still working away to finish up the last few years. Obviously there's a lot of factors going into that decision and it's not one that I have a realistic option to make at this time if I still want to retire by 40. There's still a long way for us to go until we can be within earshot of calling ourselves financially independent so if my goal of reaching it by 40 is still feasible, which I believe it is, then I have to keep to my current grindstone. As I've gotten older and worked closer to my freedom and grown my family, I've started to lean more and more towards Option 2. Time with my family and freedom to do what I want whenever I want without having to be ready to work at the drop of a hat has become more and more important to me. It's funny how a small child can do that.
So I have some questions for all of you.
1. When do you project you will reach your crossover point?
2. What's your plan when you reach financial independence?
3. Which option do you think I should go for?