Objective information about retirement, financial planning and investments


Financial Independence or Retirement – Which is the Better Goal?


This is a post by author and financial journalist Jonathan Chevreau.  Jon is at the forefront of a movement he calls “Findependence.”  This is essentially looking at becoming financially independent so that you can pursue the lifestyle of your choosing.  This may be a form of semi-retirement, but the point is to work because you want to, not so much because you have to. Findependence is a process and a journey rather than a big financial event like the traditional concept of retirement.  I agree with Jon’s views on this issue.  Jon is the author of the book Findependence Day, be sure to check out his new site Financial Independence Hub.  

One of the problems with selling the concept of Retirement to young people is that old age just seems so impossibly far away in the distant future. The financial services industry and the mass media love to talk about retirement but let’s face it, if you’re a recent college graduate just entering the workforce, retirement is perceived as something far far in the future, just one step before the equally remote prospect of death. 

Findependence far more accessible for the young than Retirement

The pity is there’s a much better term that could be substituted for Retirement. It’s called Financial Independence or what I’ve dubbed “Findependence.” (simply a contraction of the two words.)

Financial independence is a goal that can be achieved not 30 or 40 years from now but in 10 or 15 years. It’s not unreasonable for a 25 year old just taking their first step on the career ladder and embarking on marriage, family formation and home ownership to set a goal of financial independence (or “Findependence”) by the time they’re age 40. 

Findependence is not synonymous with Retirement

Does that mean “early retirement” at such a tender age? No, because Findependence is not synonymous with Retirement. Most of us know what Retirement is but for a refresher course on Financial Independence, go to Wikipedia and search the term Financial Independence. You’ll find an entry which is simple enough to grasp: financial independence is the state of being able to have enough financial wealth to live “without having to work actively for basic necessities.”

If you’re findependent, your assets generate income greater than your expenses. Note that Findependence is not correlated with age. If you have modest means and have been frugal enough to build up a nest egg in 10 or 15 years, you may well be “findependent” by age 40 or so. Conversely, if you’re a high-earning high-spending professional who requires hundreds of thousands of dollars of income a year, findependence may not be in your grasp even by the traditional age of retirement.

You can see why people often confuse the terms since two ways of generating passive income is often employer pensions and Social Security or other pensions paid by governments. These particular income sources do not begin until one’s late 50s or 60s. But again, if your needs are modest, you might well be able to establish early findependence solely with a portfolio of dividend-paying stocks, perhaps supplemented by part-time jobs or freelance work. 


For baby boomers, the so-called “New Retirement” will often prove to be a variant of Findependence and traditional Retirement. Very few boomers, even if they have the financial means, will embrace the traditional “full-stop” retirement of their parents who enjoyed Defined Benefit pension plans. The older generation may have experienced the gold watch and a quarter century of golf, bridge, reading but boomers are much more likely to embrace a semi-retirement that consists partly of employer pensions, supplemented by government pensions, taxable investment income and part-time employment income, and perhaps the fruits of certain creative endeavors: royalties from literary or musical creations, licensing fees from various entrepreneurial ventures, fees from serving as corporate directors and other sources of income. 

Jonathan Chevreau is a financial journalist and author.  He is the author of the book  Findependence Day.   The original version of this post appeared on his new site Financial Independence Hub.  Jon is a must follow on Twitter

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner.

7 Major Benefits of Financial Independence


This is a guest post by author and financial journalist Jonathan Chevreau.  Jon is editor of MoneySense Magazine and the author of the book Findependence Day.  

Roger has kindly asked me to write another guest post for his blog. Earlier this summer my maiden effort here – Forget Retirement Seek Financial Independence – seemed to strike a chord so I thought I’d flesh out some of the thoughts there.

When I Google the word retirement, I get 176 million hits.  Surprisingly, financial independence gets a healthy 73.4 million hits. I’d have guessed the word Retirement would get ten times more hits, not just twice as many.  There are still many more books about Retirement but books on Financial Independence seem to be on the rise.  Google “financial independence books” and you’ll find several titles.

Finally, findependence gets a mere 17,000 hits but that’s because it’s a neologism or invented word. Strangely, “Findependence Day” gets 347 million hits but that’s because Google interprets the search to include Independence. Narrow it down to just “Findependence” and it’s a more realistic 100,000 or so.

No matter. So what exactly is the difference between the terms Retirement and Findependence? For starters, let’s link to an excellent essay that appeared last week entitled 7 Reasons Everyone Should Reach Financial Independence. These are all good points and the article certainly provides some food for thought. Some points are inherent in my own approach to Findependence; others I hadn’t explicitly considered.  Here’s my own take on the seven points.

The Ultimate Unemployment Insurance

This is certainly one of the key attributes of Findependence as I’ve always viewed it. If you’re not findependent then by definition you’re living paycheck to paycheck, which means that if you do lose your job, you’re at the mercy of those who dole out the rather minimal amounts of unemployment insurance – assuming you even qualify and can jump through all the hoops.

Freedom to Live and Work on Your Own Terms

This is the essence of my vision of Findependence.  Even if you choose for the time being to remain employed, as I say in Findependence Day (the novel), you’re working because you CHOOSE to, not because you MUST (financially speaking).  Of course, Findependence also makes it more likely that you can go out on your own as a consultant, freelance writer or speaker or entrepreneur: as with Point 1, you’ve established a steady stream of income that will be coming in whether or not your cultural or entrepreneurial ventures get off the ground in a reasonable amount of time.

License to Take Risks at Work

This is another aspect of Findependence I’ve noticed in my own career. In fact, I wrote the original edition of Findependence Day while I was a salaried staff writer at the Financial Post and wrote the revised all-American edition as a salaried employee in my current position, editor of MoneySense magazine.  I’ve called this financial novel a “financial love story,” but I’m not sure I’d have gone out on such a limb if I were still paying off a mortgage and felt I had to cleave 100% to the company line.

Extra Spending Money

I can’t say I had given this one much thought before but no doubt it’s true. If you still have a day job AND you have investment income coming in and building up, it goes without saying that some of that extra cash flow can be diverted into spending on some really nice stuff. Personally, I believe in “Freedom, Not Stuff!” (to use a line from the novel), so I’m inclined to stay on the path to guerrilla frugality (another term I use), eschewing conspicuous consumption and thereby speeding the arrival of Findependence Day, or even the traditional Retirement Day. (I explain the difference on my own blog at www.findependenceday.com.)

Freedom to Pursue Entrepreneurial Ventures

Findependence means you can put some capital at risk and you take a large chunk of time to develop a business idea or creative project you hope will ultimately generate financial returns in the future.

Retire Early or Very Early

This point reinforces the concept that Findependence and Retirement are NOT the same thing. You need findependence to retire but you can also have Findependence and choose NOT to retire in the traditional sense of the word (that is, gold watch at age 65, followed by endless rounds of golf, bridge and daytime television).  Conversely, if you have NOT achieved Findependence, it’s madness to try to retire.

Spend more time with your family  

Sure, and I’d add “Spend more time at whatever your passion is.” Hopefully we all feel passionate about the immediate members of our family. Spend more time being a painter, or musician, or stand-up comic, whatever your passion, you can be sure that a degree of Findependence will allow you to spend more time on your chosen activity.  One way might be semi-retirement or phased retirement. If you’re findependent but still gainfully employed you may want to go down to a four-day week, thereby having three-day weekends that can be spent with your family.  Assuming they themselves are still on the five-day week you could do the various chores on the Friday or Monday, freeing up the traditional two days of the weekend to focus on family.

Jonathan Chevreau is editor of MoneySense Magazine and can be reached at jonathan@findependenceday.com.  His book Findependence Day  is available at Amazon.com, Barnes & Noble.com and Trafford.com.  Jon is a must follow on Twitter

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial PlannerPlease check out our Resources page for some additional links that might be beneficial to you.  

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5 Tips for Financial Independence


With July 4th upon us it seems like a good time to think about our own financial independence.  This may mean different

saving and spending

things to different people and I’ll leave each of you to define financial independence in your own way as it pertains to your unique individual situation.  However you define it, here are 5 tips to help you get there:

Set specific financial goals.  Putting money aside for the future versus spending it now on something you might want but don’t really need is easier if you have a goal in mind.  Maybe that is a nice retirement on the beach, or that new sports car you’ve always wanted, or perhaps ensuring that your kids can get through college.  The key is to establish goals that are quantified and have a definite time frame attached to them.  This way you know when you will need the money and how much you will need to have saved.  This allows you to track your progress as well.

Spend less than you earn.  The amount of money left over for saving is a direct result of your lifestyle choices. Since you will typically want a similar lifestyle during retirement, your lifestyle decisions now will impact the quality of your life down the road. Step one is to get a handle on what you spend and determine what, if anything can be eliminated. This would typically include reducing nonessential expenditures, such as entertainment, dining out, and vacations. Another strategy is to find ways to spend less money on the things you currently buy. For instance, obtain quotes for car insurance from several companies, placing any premium reductions into savings. It is vital to track your spending via a budget.  Online tools can be a big help here.

Save money before you see ever see it.  Set up an automatic savings program where money is automatically deducted from your paycheck or your bank account on a regular basis and deposited directly into an investment account. One great way to do this is to sign up for your company’s 401(k) plan, where funds are withdrawn every pay period. The money is  invested on a pre-tax basis, offering even more savings.  Make sure that you at least contribute enough to earn your company’s full match if one is provided.  You can save in a similar fashion into an IRA, a taxable brokerage account, or into a savings account to build an emergency fund.  I can tell you from personal experience that I have a number of clients who have accumulated enviable sums for retirement via regular contributions to their 401(k) plan.  While the 401(k) sometimes gets a bad rap from the financial press it can work well for those who take full advantage.

Don’t let debt derail you.  If a significant portion of your income is going to pay interest on loans that leaves less available for saving and accumulating wealth.  Work to eliminate all debt except your mortgage. Pay cash for purchases so you don’t incur additional debt, take the attitude that if you don’t have the cash you can’t afford it.  Pay down your existing debts beginning with the debt with the highest interest rate. Once that debt is paid in full, start paying down the debt with the next highest interest rate, continuing until all of your debt is paid in full.

Invest with a plan, don’t just save.  A financial plan should serve as the foundation for your investing activities.  A financial plan is like having a road map for a car trip.  With a map you’ll know where you are going, you’ll be able to track your progress en route, you’ll be able to adjust your route for unexpected developments such as road construction, and you’ll know when you’ve arrived.  Starting with a financial plan in place will help you develop an investment allocation that combines a level of risk that you are comfortable with while reaching for the level of return that will allow you to reach your goals.

These are just a few ideas for achieving financial independence.  What would you add to the list?

If you need help evaluating your financial situation or with financial planning to achieve your goals please feel free to contact me to discuss your situation.


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