Now that I am well into my thirties, a crucial stage of wealth building decade, I want to take a tally and note of my goals before I reach 40 to keep myself accountable and have clear goals to work towards. I mentioned some of my goals related to my assets (read: Assets In My Portfolio). This will include those and a few more items.
Pay off Primary Mortgage
First and foremost, in order to truly reach financial independence, having your primary residence paid off would come to my mind first. Being able to live debt free in my primary home would give me peace of mind. As mortgages are typically one's largest living expense, eliminating this payment would allow you to earn less in passive income in order to meet your living costs.
Generate Living Expenses through Passive Income
Similar to having primary residence paid off, being able to generate your entire living expense through passive income would mean that you are financially independent and do not have to rely on wages to pay for all of your bills. Having a passive income, that meets your monthly expenses (including primary residence) would be the goal in living financially independent, but a larger income than your expense would be ideal. Passive income can be from many different avenues. For us, the investment properties and the dividend income are the two pieces that we are currently building today by accumulating rental properties and continuing to invest in the stock market (read: How to Buy an Investment Property every 3 Years) / (read: Stocks That I Own in My Portfolio, as of 1/30/23)
Be able to withdraw 4% from our brokerage account each year
The "4% rule" is the amount of money you can withdraw from your retirement account each year to pay for your living expenses without taking a big dent in your account. Because the average stock market growth is 8%, taking out 4% would not be an issue in running out of your retirement funds. This is a goal for when we reach the retirement stage.
Be able to Live Abroad
You have technically reached financial independence when your passive income is enough to cover your living expenses. At that time, you don't have to retire and can continue to work because you choose to and want to grow your funds even larger. Regardless, at this stage, you have leverage in your life as you have choices. Once I reach this milestone, Trang and I would like to take the opportunity to live abroad and fully immerse ourselves outside the USA where we grew up.
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