The topic of financial independence has been picking up in popularity and we believe this is for good reason.

To us, financial independence means the ability and security not to "work" another day if an individual didn't want to or if they simply couldn't. In order to achieve this, we believe approaching life from a cashflow standpoint helps paint a clear picture. There will only be two levers: expenses and income.

• Expenses - This one is pretty simple and is the amount of money that exits your bank account every month (food, bills, rent, mortgage, groceries, etc). The first point is to be able to get a good sense of the amount of money you spend. Then, set a rolling, weekly budget to make sure there's some control over how much is spent on a recurring basis. The goal is not to get too intense about minimizing expenses because the objective is to live a happy life and some of that requires money. Additionally, there's a finite amount of money you could stop spending. One key thing to avoid: lifestyle creep. This means, spending more as you make more - if you were to increase your income by $100, we believe a good benchmark is allowing oneself to spend $10 more - not $20 and definitely not $100. Lifestyle creep traps you into a corner where you're dependent on your income to support your recurring expenses.

• Income - This is the fun part for us. The other side to that equation is how to generate income "passively". There's an indirect correlation between passivity and income. Eg - more passive = less income. Or one can start with a lot of money and generate low income (percentage-wise) but the absolute dollar amount is high. Some ways to generate cash flow:

  • Get a job (this doesn't count if you hate your job but if you enjoy what you do, I'd argue this counts)

  • Rent out your car or house (eg - Airbnb, Turo)

  • Invest in cash flow real estate

  • Start an e-commerce business

  • Earn interest lending money

Once an individuals income exceeds the sum of their expenses - cha ching! Financial independence. You can spend a ton but would have to generate a ton of income or you could spend very little and only need a bit of income. I think everyone's number is different but it's super important to consider what type of lifestyle you want to be living and how much money it takes to achieve that lifestyle. This is the point before diminishing returns where you could spend a lot more money and receive minimal happiness.

But why does this all matter? We believe human potential is unlocked when we're financially free. At this point, we can begin to explore and make strides towards creating a fulfilling life. Note: what fulfills us today will not necessarily be the same thing days down the road.