The One Number That Takes You to Financial Freedom

The sky is covered by a cloudy grey blanket this morning. Though there's strip of blue to the South. Maybe the sun will make its way here by afternoon.

Anyways, did you bring you average monthly spending and income? Oh, great. Do this:

Subtract your spending from your income. This is your average savings:

Divide your savings by your income. Multiply that number by 100. This is your savings ratio.

Check out the chart below. I'm going to explain the beautiful inner workings behind it in a few posts. But at the moment let's keep it simple. Find your savings ratio. Next to it you'll see the years of work left until freedom, assuming you start with $0.

At this point you will be able to travel East Asia for however long you want. And when you come home there will be no deadline to find a job. Or at this point you will be able to snowboard Utah's light pow till you drop in exhaustion on a Tuesday. And then go back out the next three days without constraint because it's dumping.

You will be able to do this because at this point your money itself will be making enough income to cover your lifestyle cost (your spending). This is called financial freedom. I'll explain this too, but again we're keeping it simple for now.

Let’s play this out. Meet Lindy and Dave.

Lindy and Dave meet each other surfing in college. They become wonderful friends, graduate university together and start work on the same day at the same local nonprofit. 

The two friends receive the same paycheck their entire working lives: $30,000/yr for the first 2 years, $37,000/yr for the next 5 years and $45,000/yr every year after that. 

They both begin working with a net worth of $0, have zero loans and love their job. Here are their stories.

To celebrate the new job and salary Dave Takes out a loan to purchase a new 2016 Subaru Outback. He gets his own rental apartment a 20 mile drive from work. He grabs cocktails and appetizers at the local bars on Fridays and Saturdays. And he gets a coffee from the hip coffee shop each morning. When he meets Lindy on Fridays for the dawn-patrol surf he swigs his coffee quickly before it cools inside the paper cup.

Dave starts by spending $2,250/mo -- a savings ratio of 10%.

Dave gets his first raise. He begins frequenting the town restaurants for his lunches, dinners and weekend-brunches. He continually updates his wardrobe with new brand-name shirts, jeans and shoes so his looks match his new income level. He gets two new Channel Islands surfboards each year. And he takes an annual surf vacation on an Indonesian charter boat. 

Dave meets a girl at a weekend brunch. They fall in love. She introduces him to her 4 favorite TV shows and restaurants in town. They make two restaurant dinners and two lunches their weekly dates. And they purchase a subscription to HBO and start catching up on old seasons of TV shows after work. 

Dave’s spending increases to $2,775/mo. His savings ratio stays at 10%.

Dave gets his final raise. He and his girl move in together. They rent a bigger condo 30 miles from work. Dave trades in his Subaru for another loan on a new BMW X5. He and his girl spend weekends checking out the restaurants and bars in neighboring towns. They stay in hotels and AirBnBs. And they get the new iPhone 6S+ as soon as it comes out, locking in their $80/month phone plans for 2 more years.

Dave’s lifestyle cost settles in at $3,375/mo. By increasing his lifestyle cost with each raise, Dave’s savings ratio flatlines at 10%. He works 51 years.

During those 51 years of dependence on a paycheck, Dave got to take three one-month long vacations. Each time he came back to work he told his co-workers, “If I only had the money to do that forever...” His co-workers laughed and said, “Don’t we all wish that… Happy Monday, Dave. Welcome back.”

So that’s Dave. Now let’s welcome Lindy.

After graduation Lindy gets a mint.com account. She calculates her savings ratio and sees it has been at 15% all of college. "42 years till freedom??" She thinks. "Nahh, uhhhh..."

Lindy celebrates her new job with a potluck dinner with friends. She moves to a cute house near a park a few miles from the downtown office square with her friends. She gets a sea-foam green road bike she found on Craigslist to ride to work. And she adds cute baskets to it for grocery shopping. She cuts her cable television contract and lowers her iPhone bill to $30/mo with Airvoice Wireless.

Lindy gets her everyday household items (trash bags, toothpaste, shampoo, etc.) and the staples of her diet from Costco. And she gets fresh fruits, veggies and meats from the local grocer. And when her and Dave meet for those Friday dawn-patrol surfs she sips the home-brew she's perfecting from the mug she loves. 

Lindy starts by spending $1,250/mo, kicking off her savings ratio at a rocking 50%.

Lindy gets her first raise. She's quite the stylish girl. She brings her friends along for treasure-hunt sessions at the local consignment shop. She giggles as her friends walk out of the shop saying things like, "I'm so stoked on this hat." Lindy organizes hang-outs and parties at her house, in the nearby park and at the beach. Her friends have so much fun they start putting on a few of their own. 

Lindy gets the wanderlust bug. She wants to explore more and needs the convenience of a car. She gets a used Toyota Matrix off Craigslist that a mechanic, whom a co-worker recommended, looked at before purchasing. Though with the car, she continues her bike rides to work and the market because she enjoys behind outside and moving about. Lindy surf trips up and down the coast camping with friends at San Onofre, Big Surf and the Lost Coast. 

On one of the trips she meets a boy. They fall in love. She introduces him to The Hidden Green. He's excited about the freedom. He takes his first steps by reviewing his spending. He makes lifestyle changes to where he values freedom more than the item or service. One change he makes is lowering his phone bill to $5/mo with Republic Wireless for his Android.

Lindy spends $1,250/mo. Her savings ratio is now 59%.

Lindy and her boy move in together and she gets her last raise. Lindy and her boy continue finding rad surfboard and like-new wetsuits off Craigslist or at local board swaps. Her boy shows her the mountains. She grows to love hiking and backpacking. Together they begin exploring the Sierras and the local state parks. 

Lindy's lifestyle cost continues at $1,250/mo. This increases her savings ratio again to 66%.

After 10 years, at age 32, Lindy's amassed $336,000! With some simply math (that we'll understand well in a few posts), she sees she can now pull out $1,120 each month and her $336,000 will never diminish. In a few months her money will be making her enough to cover her lifestyle cost!


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Lindy gets her boy in the room to share the news He had got the same paychecks as her and started with a net work of $0 two years in to Lindy's freedom expedition. They are ecstatic to see that together they’ve amassed $646,000 after 10 years! They see they can now pull out $2,154 each month – the same amount as their living expenses – and their $646,000 will never diminish! They are financial free!

Lindy and her boy take off to travel the world. After a year of incredible adventures in Mexico, Costa Rica and Nicaragua they begin to miss their loved ones. They decide to come home. Because they kept their lifestyle cost the same while traveling, they return home with the same amount of money in their bank account! They hope in a rental house for a month near friends and family. They invite them over to share stories and meals over the next few weeks without the worry of finding another way to pay for rent or food.

They then purchase an old house near some lovely hiking trails and a good school system. Lindy's boy works together with a few trade contractor friends he's hired and they re-build a lovely home for them to live in. A few weeks after the move-in they have their friends who helped build the house and their families over for a wonderful evening celebration.

They then decide to have a kid. Nine months later, Lindy brings little-Lindy into the world. Lindy and her boy get to spend the time they’ve always wanted with their child because they aren’t dependent on going to a job to pay for their lifestyle. As little-Lindy grows Lindy starts up a small hand-made jewelry business inspired from her trip. And her boy starts giving mountaineering tours with the local tour company on the days of his choice.

Seem to good to be true?

Here is the real life version of Lindy and her boy traveling the world. And here is the real life version of Lindy and her boy once they have a kid. Two blogs I am totally inspired by.

So now let's get there.  

Here’s your next step: Look at the spending pie chart on your mint.com account. Weigh your current purchases to purchasing freedom. Look at how Lindy lived her life. What will you change right now to knock 10, 20, or 30 years off your dependence on a paycheck?

Oh, look. The sun came out. Well, enjoy the blue sky. I'm excited to talk again soon!

Check out Lindy and Dave's lives by the numbers here. And feel free to ask any questions or leave your thoughts in the comments below. I would love to hear them!


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