The best methods to reach financial independence


In this post we outline the top ways to reach financial independence.

We cover everything from investing in the stock market through to real estate and side hustles. Incorporate these strategies to ensure you reach FI as soon as possible while leveraging your existing skills and interests.


Once you've accumulated savings to the value of at least 25 times your annual expenses, you're generally considered to have reached financial independence. This post details the top methods to reach financial independence as well as how to get there long before having saved 25 times your annual expenses.

Before we jump into the specific strategies for reaching FI, we can broadly split them into two categories:

  1. The first category is focused on networth and is probably the most common. This is where you build up your savings until you've reached 25 times your annual expenses.
  2. The second category is focused on growing or replacing your income. This is where you look for opportunities to eithing increase your primary income or replace it so that you no longer have to work the typical 9 to 5. If you're able to create passive income streams that are sufficient to replace your primary income and cover your expenses, you've reached financial independence even if you don't have 25 times your annual expenses saved.

Ok, now on to the specific strategies.

1. Increase your salary

The first strategy is probably the most common and simply involves looking for ways to continually increase your salary while funneling the extra income into your investments.

The key here is to ensure you keep your expenses in check and avoid lifestyle creep. A higher salary means nothing if you spend all of it.

Related Post: Lifestyle Creep

Here we can try a few different methods to increase our salary:

Annual increases and bonuses

Depending on the industry you work in, there are often performance based increases or bonuses issued to top employees each year. By keeping your expenses constant, you can funnel bonuses and increases into your investments.

Climbing the ladder

The next method is related to the first but often involves a fair amount of company politics if you're looking to fast track your growth. Getting promotions is often not only about being a top performing employee, but also playing the politics game which is certainly not everyones cup of tea.

Promotions generally come with salary increases which are typically far higher than a yearly performance increase.

Job hopping

Moving to a new company often comes with a bump in your salary. Aiming to move companies every few years may be a strategy worth investigating.

Keep in mind that you don't want to move companies too often since this might look bad when potential employers look over your prior work history. However with that in mind, moving companies every few years is far more common now than it was 20 or even 10 years ago.

2. Living frugally

Living frugally basically means living below your means and cutting away waste from your expenses.

Excessive spending, debt, trying to impress the Jones's and living above our means are all too common in todays age. If we constantly feel the need to spend all our income (and more) every month on things we don't really need then we'll never reach financial independence.

Frugality is not about denial, depravation or not spending on the things you love. Rather, it's about identifying what's really important to you and focusing your efforts and spending around that while cutting out the rest.

By cutting out unnecessary spending from your life you'll not only be able to invest more towards FI but your FI number will be lower since your expenses will be lower.

3. Jobs that provide pensions

This strategy is not referring to companies which provide retirement plans which you contribute towards (eg: 401k). Rather, this refers to working for the police, military, fire fighters and others which often provide pensions once you've reached 20 years of service.

These pensions might not be enough to cover your expenses in full but if you invest part of your income while working in one of these industries you're likely to reach FI by the time your 20 years of service have been reached.

4. Invest in the stock market

Investing in the stock market is a common strategy for reaching financial independence. There are actually a few different strategies here which can be focused on or combined:

Net worth and Portfolio value

Focusing on portfolio value means you're looking to grow your investment portfolio until such time as you reach FI. In other words, you continue growing your invested capital until it reaches at least 25 times your annual expenses. At that point you'll use the 4% rule to live off your investment capital by withdrawing what you need to live off of each year.

Yield and income

Here you'll look to invest in dividend paying stocks or preference shares with the goal of one day living off the income your portfolio generates.

This strategy is less about getting to a specific portfolio value as is the case with the above startegy and more about reaching a certain yield or income level from your portfolio.

Of course combining these methods is also possible.

5. Invest in property

Investing in property is another popular method of reaching FI. Property as an asset class has several unique characteristics which results in it behaving very diferently from the movements of the stock market, bond market or most other assets.

Adding property into your FI plan can be done in several ways:

Rental properties

The idea here is to purchase properties which you rent out to tenants. While the most common strategy here is to focus on residential homes, it's also worth investigating commercial and industrial rentals.

The income received from your rental properties can either be invested elsewhere (eg: stock market) or grown to the point where the income covers all your expenses resulting in you having reached FI through passive income.

REIT (Real Estate Investment Trust)

A Real Estate Investment Trust is a company which owns and operates income generating real estate. The bulk of the income generated by these companies, which typically comes in the form of rent, is then paid over to investors.

Investing in REIT's can be done through ETF's listed on the stock market which gives you exposure to multiple REIT's and thousands of properties.

This is an excellent option for gaining exposure to the property market without actually purchasing any property directly. This article goes into more detail on the pro's and con's for REIT's versus physical property.

Real Estate Crowdfunding

Investing in Real Estate through crowdfunding essentially allows individuals to fund Real Estate projects for companies who may have typically not had access to enough capital for those projects.

Individuals are able to contribute small or large amounts to Real Estate projects through online crowdfunding platforms which are combined into large pools of capital.

6. Invest in Bonds

Bonds are debt instruments issued by entities such as companies, municipalities and governments where you essentially loan them money for an agreed upon interest payment (or coupon) over a specified time period.

Bonds have several variants some of which pay a fixed interest while others are linked to interest rates. Bonds often improve the diversification of a stock portfolio.

One strategy for incorporating Bonds into a FI plan would be to create a Bond ladder. This involves purchasing Bonds at varying maturity dates every year such that you'll have a constant stream of income as they reach those varying maturities.

While Bonds aren't a popular choice in the US due to their low returns in recent years, you should keep in mind that Bonds in other countries can be very attractive. It's not uncommon to find Bonds in parts of the world with 8% to 10% yields. That makes them an excellent addition to any FI plan.

7. Create a side hustle

Side hustles represent small business which you create and run to suppliment the income from your primary job. While side hustles might start small, there's always the chance that they grow enough to eventually surpass the income from your salary.

Side hustles often start as an expression of your true passion which you do after hours and on weekends with the goal of eventually quitting your job to work on your side hustle full time.

A side hustle can be created out of anything you can image whether that be online or offline:

Offline Side Hustles

  • Start freelancing: Use your skills to build up a network of clients to do freelance work for.
  • Gig economy: Small ad hoc, informal jobs are very popular these days and often don't involve a lot of time.

Online Side Hustles

  • Fiverr or Upwork: These represent the online versions of the above mentioned gig ecomony and freelancing options. There are several online platforms which allow you to do work on a part time basis, two of which are Fiverr and Upwork.
  • Blogging: If writing is your passion and you have an interesting topic that you're knowledgable, you could work on monetizing a blog. While this requires an exceptionally large blog audience, it is never the less possible through sponsorships, advertisements and affiliate marketing.
  • SaaS: A Software as a Service is an online product or subscription service which users pay for access to. If you have experience in the software development field, creating a SaaS may be an option worth considering.


So there we have it, the top methods to reach financial independence. Of course any of the above strategies can be mixed and matched together to help you reach FI as fast as possible.

While growing your investments to 25 times your annual expenses is the most common strategy within the FI community, it's not necessarily the best or fastest option for everyone.

Article by Brendon @ Money FI

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