Many financial independence bloggers talk about saving 20-30 multiples of your annual budget (expenses) to become financially independent and retire early. However, the final number for that calculation can be pretty daunting for many people, especially if you didn’t think about retirement in your 20s or 30s and have to start from zero. Furthermore, saving 20-30 times of the yearly budget to retire early may not be possible for everyone.
The financial freedom bloggers talk a lot about cutting down spendings (beneficial for both: financial independence and the planet) and living comfortably without feeling deprived. Even though I support that concept wholeheartedly, I’m also realistic. I know that life happens, expenses pop up and dipping into your savings for many may sometimes be the only way to cover their expenses. Moving to the areas with lower costs of living is a great idea and I’m all for it, but not everyone’s job is flexible enough to allow that, and often jobs keep people in expensive areas, even though those jobs may not pay much.
There is also an issue of salaries being area-bound, and in less expensive places the same jobs pay less. Of course, city living is more costly than small-town living, but if you earn less, it may even out. Then, if you live in the commuter’s town and commute to the city for work, travelling either by car or public transport can significantly add up and eat into your savings and investments. These two elements, cutting down on spendings and living in low-cost places are the core of the financial independence movement.
I began my journey towards financial independence two years ago (during the first national British lockdown). I quickly realised that cutting down on my expenses was one of the most critical elements to get me started on my journey towards financial freedom.
Adjusting my yearly budget over the years, discovering my real needs and what I can live without (deprivations are never the answer in the long run) has worked for me. However, I’m still very mindful of my family’s monthly budget and keep an eye on it because if I don’t, it can quickly go out of control. Cutting all of the expenses cold turkey may work for some people, but the majority will struggle with that and will rebound rather quickly.
Having specified goals why I want to become financially free has been the driving force behind my actions. If your goals were vague such as: “I want to retire early because it sounds like fun.”, you will likely struggle to get to the finish line. However, if you have a specific goal in mind, say: “I’m saving up to build a tiny house that could give me financial freedom and independence from having a mortgage”, then your goal is clear and you can set the plan you need to follow to make it happen.
If part of your financial independence plan is to build and live in a tiny house, seeing that materialise in front of your eyes can be much more stimulating than putting money towards your employer’s retirement scheme or investment portfolio. Not “seeing” where your investments are going might feel, for some people, like walking through the darkness without knowing where and when the exit is.
In recent years tiny house movement became pretty popular and acted as a massive stepping stone toward financial freedom and independence for many people worldwide. The global property market has been on steroids for a long time, pricing many people out of areas and making it impossible for others to move to other areas or get onto the property ladder. However, the tiny house movement champions small, often portable homes that can be transported (houses on wheels or container houses) and put on someone else’s land for a fraction of what a traditional mortgage would cost.
The current housing system is set up to lock people into 30 + years of mortgage payments. Just imagine that you pay £1000 each month for your mortgage; that means you have to earn that £1000 each month just to make the payment, regardless of whether you like your job or not and whether you are healthy to carry on with your job. That £1000 payment doesn’t include bills, which are currently skyrocketing all around. The property you purchased at the age of 30 will become yours in 30 + years; of course, you can sell it in the meantime and make a bit of profit, but most likely that profit will be used to purchase another property with an even larger mortgage.
What if, instead of saving up deposit money for your property, you build a tiny house on wheels, which you can take with you everywhere you go. This way, you won’t be tied down to a 30-year mortgage and one place. That £1000 may well be enough to cover all your living expenses, not only your mortgage payment.
Now, imagine that the land your tiny house sits on offers you enough space to grow your garden. Of course, not all climates allow harvest all year long, but even small plots of land often allow gardeners to grow enough fruits and veggies to live off the land during the spring/summer months and make enough preserves to last over the wintertime (this is how my granny’s household was run).
The tiny houses often champion the use of new green technologies and many salvage materials, which is a clever way to keep the cost down and save good materials from landfill. All new technologies will have upfront costs, but in exchange, they offer better resilience from the world’s events, political upheavals and global market crashes.
Tiny houses, off-grid living, and growing your own food are excellent ways to become financially independent. Besides tiny houses are, by their nature, small, which in turn limits the amount of clutter, freeing up finances and helping the environment. Keeping 20-30 times of your yearly budget invested simply may not be on the cards for many people. If you want/plan to become financially independent but feel that saving and investing such vast amounts of money isn’t for you, look into the tiny houses movement and grow your own food. Those two concepts need initial investments but will keep paying off for years.