From my experience it seems that when discussing personal financial management, there are two types of people: those who have joined the Cult of Personal Financial Management, and those who have not.

Why a Cult?

Everybody is interested in how much money they have, so why am I referring to a group of people as in this so-called cult? The answer is the members of this cult understand the value of $10 and the truth of how ordinary people can become financially independent before the age of 40.

Retirement is Old News

The mainstream idea of retirement savings is that you work until the age of 65, at which point you retire, having saved just enough money to cover your expenses once your income drops to zero. Members of the personal financial management cult reject this idea of retirement and put forth another goal to strive for: financial independence. Instead of fixing on an age, the goal is a saving number which is surprisingly similar from one person to another. If you have saved enough money that your yearly expenses are less than 4% of your savings, then you can be confident that you have reached financial independence.

For example, say you have average monthly expenses of $4,000, which you could cut in half with some aggressive but reasonable measures. By driving down your monthly expenses to $2,000, you will be financially independent once you have saved $600,000, which can be accomplished in under ten years of a career.

Financial Independence - The New Goal

What is the big deal with this term, financial independence? Does it mean you can give your boss the middle finger and spend the rest of your life on the couch in your man-cave?

While you can certainly leave your current day job if that is what makes you happy, financial independence is not about never working again, it’s about being empowered to spend your time doing what makes you happy. For many people, this means some sort of activity which will continue to bring some sort of income. Whether it means volunteering, teaching, or wood-working out of your backyard, it depends on what skills you want to build, what kind of experiences make you happy, and whatever future goals you set for yourself.

Tools to Join

We live in an amazing time, where all the public information available on the internet is available right at your fingertips, all of it a carefully crafted google search away. Rather than re-write a lot of the valuable lessons that I’ve learned, it’s quicker to point you to Mr. Money Mustache who wrote far more on the subject and did far better at making an impact than I could hope to do myself.

Do yourself a service and start diving into the many sources of wisdom and lessons learned that you can find for free online. If you don’t know exactly how much you spend each month, and how long it will take you at your current savings rate until you will hit your goal of financial independence, then you have a lot to gain by expanding your financial knowledge.