Short version is organising your finances and life in such a way that you can retire as early as possible. Things like maxing out the right kind of investment (not sure in the US but in UK it's things like ISAs), controlling outgoings, being frugal, ...
The core idea is to define your annual expenditures (let’s say $50k), a long term investment strategy you personally feel comfortable with (say 5% ROI), and from there you can deduce the amount you need to save to be financially independent (in this case, $1M).
>" a long term investment strategy you personally feel comfortable with (say 5% ROI)"
Could you elaborate? Why would you need a level of comfort with an ROI? Or is the thing you need to be comfortable with actual the risk involved in getting that target ROI? Is that what you mean?
Also is the "million" you mention just a hypothetical? Although a million is a lot of money I don't thinks it's enough it's large enough to to qualify as being financially independent no? At least not in the US or EU. You would still need to work full time as it's not enough to retire on.
you sure as hell don't need more if all you want is retire early and live frugally.
if you'Re thinking of a McMansion with several cars which you exchange every so often and constantly buy new gadgets etc then no, its not gonna be enough.
>"you sure as hell don't need more if all you want is retire early and live frugally."
You sure as hell do need more than that if you want to retire in your early 50s and you plan on living another 30 years. At least if you want to live somewhere remotely interesting. $1 million divided by 30 would mean you need to live on 33K a year. Which is about $2,750 a month without accounting for future inflation which would erode this figure substantially over those 30 years. An average inflation rate of 2.50% would be a cumulative inflation of 109.76%. Your $2750 would trend towards half that during that time[1]
Please walk me through this with some concrete numbers. How long do you suppose it takes to build up a million through investing your savings? You realize you can lose money in the market as well right? Lastly When you start pulling that money out to live on each year you aren't earning money on this.
Most recommend using 4%, although that's also considered too risky by many. On the flip side 3% is also seen as too conservative. Not being savvy with economics myself, I've personally chosen to use a happy average of 3.5%
Mr Money Mustache [1] advocates just investing in index funds. Others push things like real estate. Really depends on where you interests and talents lie.
A common thread that these people tend to find though is that once you've saved up that much money, what you have actually learned is how to efficiently grow wealth, and I have seen very few examples of people actually just stopping there and coasting. Usually they just keep on trucking, maybe shifting into a different field.
