Financial Independence

How to quit your job
and never work again.

Rather than working a 9-to-5 for the rest of our adult lives, many of us would rather retire early.

How difficult is this?

Let's look at the fundamental formula for Early Retirement and Financial Independence.

There are two types of income.

Most of us have Active Income. This is your 9-to-5 job. It's where you trade your time for money in order to pay for your expenses. It's what we're trying to escape.

Passive Income is money earned while you sleep (most commonly our investments). When you generate enough Passive Income to cover your expenses, you can stop working. This is called Financial Independence.

When you reach this point you have two choices:

  1. You can stop working and retire
  2. You can keep working and get very rich
Types of Income

Active Income is money earned for performing a service (i.e. wages and salaries).

Passive Income is money earned without spending your time to earn it.

Core Principle

Financial Independence is when you have more Passive Income than expenses, and you no longer need to work.

Core Principle

Investing in the stock market can generate Passive Income.

There are many ways to generate Passive Income, but for now we'll focus on stock investing, specifically Index Funds.

An Index Fund is a collection of a lot (hundreds or thousands) of company stocks. Investing in an Index Fund allows you to spread your risk over a lot of different companies.

You can conservatively assume that an Index Fund will grow 7% a year over the long term, but often it can be higher than this.

You can safely withdraw 4% per year from your investments when you retire.

While you're working, you will grow your investments in Index Funds. You won't touch this money while it grows.

When you retire, you can conservatively withdraw 4% a year* without it ever running out. You can skim off the top of your investment growth for the rest of your life without it ever running out.

How much money do I need to reach Financial Independence?

Let's estimate it with some napkin math.

Step 1

How much money would you like to spend per month when you stop working? (This includes everything from rent, food, clothes, activities, etc.)

Your Monthly Retirement Spend

per month

Your Target Amount


This is the amount of money you need in order to pay yourself $ per month for the rest of your life!

Step 2

How much can you save per month to invest?

Monthly Contribution

per month

How much do you currently have saved?

Current Savings


Years of Savings


How long it will take you to reach $0 if you save $ per month. (Don't do this, invest instead.)

Years of Investing


How long it will take you to reach $0 if you instead invest your savings in basic Index Funds (with ~7% return). We'll show you how.

Does this seem achievable?

Take your time to play with the numbers.

  • Could you make do with less in retirement?
  • Could you contribute more of your paycheck?

I know we've glossed over the details, but don't worry. There will be plenty of time to cover them in later lessons.

To explore this concept visually, check out our very popular Investment Calculator.


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