Over the years I’ve become incredibly focused on achieving financial independence (FI). Simply put, FI is the point at which one amasses a personal net worth large enough to support your lifestyle through investment income. Essentially, it’s the point you can retire. There are a ton of great communities, blogs and websites out there dedicated to the topic. I’ve found however, they mostly focus on the personal finance aspects of the pursuit: budgeting, investing and generating incremental income through side hustles. Those are all important tools in the wealth building toolbox, but they don’t offer much in the way of optimizing the biggest piece of almost everyone’s finances – salaries. By huge margins the biggest piece of nearly everybody’s financial puzzle is labor-based income.

Income Over Investment

Lets look at two young professionals making a yearly salary of $50,000. Professional A, lets call him Saving Sid, focuses his efforts on cost-cutting and intelligent investing. Sid is able to cut $10K/year from his spending and invests the money wisely over the long term, earning on average 8% a year. He never really outpaces inflation with his yearly cost of living raise but, thanks to the magic of compounding interest, after 30 years Sid admirably added $1.2MM to his retirement portfolio with that $10K/year investment. Nice job Sid.

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