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Recently I announced my imminent departure from IBM noting that I was embracing the "independent" part of being "financially independent." To that end, I received a host of very heart-warming e-mail notes and discussion forum postings.

One such e-mail posed this question in it: "Does 'financially independent,' come anywhere close to 'independently wealthy'?"

Interesting question, as when my financial advisor first said to me, "You are either already, or 'on the verge' of being, financially independent," my response to him was, "I know, in general, what financially independent means, but is there an official financial definition of it?"

His response, paraphrased, was this, "Well, to us (meaning the financial company he works for), it means that you have enough money (or enough money to continue to generate enough money) to live a lifestyle with which you're comfortable until you're about 95 or 100 years old." (In other words, well beyond your average life expectancy.)

That's an interesting definition, because if you think about it, one can clearly be financially independent without being independently wealthy.

Which is basically the case for me. While I won't say I don't have a good nest egg, I am not a millionaire. (In the interest of full disclosure, though, I would say that I am within striking distance of it, and even with a somewhat conservative, continued portfolio growth, I'll probably hit it eventually.)

So, how did I become financially independent at age 50, albeit not independently wealthy? Here's how it occurred for me:

  • As "they" promised me, compound interest has been my friend. From the day I walked into IBM 28 years ago in 1980, I started contributing more than the maximum amount matched by IBM in their 401K savings plan. Although IBM matched only 6% of contributions; I always contributed 10% of my income.

  • I am a person who is very clear on the difference between wants and needs, and I cater to my needs, not my wants. I won't say that I didn't go through a (relatively) short period of "consumerism" in my life, but I quickly found out that "things" aren't what make me happy.

    • I was married for 16 years, and my wife and I had a "big" house. But, we paid $110,000 to have it custom built, and sold it about 12 years later for about $225,000.

    • I did drive a BMW for a while, a car with which I had a love-hate relationship. Loved driving it; hated paying to have it serviced. Three cars ago, I bought my first used car, the previous year's model, with very low mileage on it, and saved $10,000 on it. I'll never pay full price for a brand new car again.

    • Instead of getting ourselves into debt on a lot of things that depreciate in value, my wife and I got into "good debt," by buying two rental properties, one in 1985 and the other in 1986. My wife got "the big house" in our divorce, and I got the two rental houses, one being the townhouse I currently live in (see next item), and the other being a three-bedroom house, which is completely paid for and which I have since actually given to my niece and nephew, so no longer own.

  • I live well below my means. And because I do, I have been able to put away almost 40% of my income over the last 10 years. My only debt is my mortgage, whose monthly payment is $379 a month, and whose balance is around $25,000. My car is paid for. I have no credit card debt. (I haven't paid a finance charge in over more years than I care to remember.) I charge everything that I possibly can every month (including any bills that I can), but pay the credit card bill off every month, which of course is easy to do when you don't spend more than you make. I use my credit card to pay for everything I can for two reasons:

    1. I get frequent flyer points for every dollar I charge on my two cards (averaging at least one free round-trip flight per year), and

    2. The credit card companies provide a nice summary at the end of the year, which basically documents my expenses.

All that is to say, as you can calculate, it doesn't take that much money to be able to cover my monthly expenses. Which in turn means that I don't need that much money in my portfolio to generate enough income to do that. And that's how it's possibly to be "financially independent" without being "independently wealthy."

And a couple of final notes:

  1. I'm quite clear on the fact that my choice of not having a spouse or partner that I have to support and my choice to not have any children to have to feed, clothe and put through college are great contributors to my relatively low monthly expenses.

  2. I don't feel at all "deprived" living well below my means. I still do the things I love to do, and I have a few things I'm not willing to "settle" on, one of them being traveling. With that said, however, I am a Quality Inn and Hampton Inn kind of guy, and a stay-one-street-off-oceanfront-for-half-the-price kind of guy, etc. (Exception being my 50th birthday trip to Australia, for which I went ridiculously all out. )


( 14 comments — Leave a comment )
Sep. 3rd, 2008 06:20 pm (UTC)
Wow, thanks for your tips. Sounds like you did all the good, smart things and are being rewarded for it now. :) Enjoy your financial independence!
Sep. 3rd, 2008 06:25 pm (UTC)
Thank you, Sonja. And thanks for reading and commmenting!
Sep. 4th, 2008 02:24 pm (UTC)
John, you have always inspired me with your financial commitments. I am saving more now than ever before because of it.

Thank you.

And enjoy your retirement! Does this mean more Helios time? :)
Sep. 4th, 2008 05:26 pm (UTC)
Thank you, Charles! It's nice to know I've had an impact on a youngster! And thanks for your continued reading and commenting.
Sep. 4th, 2008 02:41 pm (UTC)
Great article and great tips. Hope to meet you in person one day at Helios.

-Greg Ng
Sep. 4th, 2008 05:29 pm (UTC)
Thanks, Greg! I enjoy your video musings! If you see me at Helios, please walk up and say hello. I'm terrible about recognizing online people in real life.
Sep. 4th, 2008 08:12 pm (UTC)
Congratulations, John. I love frugal stories and the frugal lifestyle. Thanks for sharing!
Sep. 4th, 2008 08:37 pm (UTC)
Re: Awesome
Me, too! And "frugal" sounds so much better than "a cheap bastard with low standards." :-) Thanks for reading and commenting, Fred!
Sep. 28th, 2015 02:08 am (UTC)
Helpful advice
As a new financially independent person - I m still finding that I regularly have to recalculate my net worth - probably to reassure myself that I can provide for myself and family for the next 30/40 years. Did you find this early on in your financial independence?

It is helpful to read about other peoples experiences in this situation.
Oct. 1st, 2018 08:27 pm (UTC)
Re: Helpful advice
In my investment account, there is a "one view" function that just shows my net worth whenever I log into it, which is often. :-) Thanks for reading and commenting.
Oct. 19th, 2018 12:31 pm (UTC)
RE: Re: Helpful advice
Thank you for sharing your very successful financial journey with us!! I am inspired by having read it. Question please, quite a bit of time has passed since you initially wrote this piece, did you ever change your mind regarding having children in your life?
Nov. 2nd, 2018 12:01 pm (UTC)
Re: Helpful advice
No. And now I'm glad I don't have children to worry about what this planet will be like for them in the years ahead.
Sep. 29th, 2018 12:13 am (UTC)
You sound a lot like my Ex boyfriend who kept meticulous spreadsheets of every cent we spent - and at the end of the month balanced every cent so we pay exactly half. (Mind you my salary was not the same as his and he on the other hand had a well supporting family , whilst I do not have a single family member).
He did that half / half thing even when we went out - but was at least embarrassed enough to pay the bill at the table, whilst later putting it into his spreadsheet. :) All that said - we are no longer a pair but I did learn some good lessons in how to be more frugal and it has benefitted me a lot in the ways you describe. I do most of the financial saving things you mention although I am raising two kids - and won't part with that :) I am now financially independent and after years slaving as an architect most days and nights beteeen 9 am and 4 am, getting a neat 4 hours sleep and half an hour a day to eat and do the hygiene part I am glad to say I see my kids growing up right in front of me rather than in a photo on my office desk. It's th for best thing I can imagine and I would rather cut down here and there than to go back to work for someone.
Oct. 1st, 2018 08:26 pm (UTC)
Thanks for reading
I don't have a single spreadsheet with my spending in it. I don't even fill out the register in my checkbook. I know how much I make, and I not only don't spend more than I make, I actively strive to spend way less than I make. :-) Congratulations on your successful financial journey!
( 14 comments — Leave a comment )



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