20 Feb 2015, 10:56pm

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  • FI

    Financial Independence

    You are financially independent when you don’t need to work to earn an income. Usually because the return on your capital wealth is enough to cover your needs and such wants as you deem necessary. Also known colloquially as having the FU money – if you boss tells you to do something you don’t like, you have the option of telling him where to go without a catastrophic change to your material circumstances,

    You can have non-financial wealth that produces an income suitable for your needs. Royalties on creative works, rent from BTL property or generous benefactors will do. There is an implication for FI that this income is sustainable for the rest of your life, ie you are not running down your capital to zero within your lifetime.

    There is no cast-iron rule that you must stop work when you reach FI – it is just that you can.

    This hokey US ad from the 1960s summarises some of the advantages of being financially independent.

    man-with-savings

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