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Wednesday, February 8, 2012

what's the difference between Financial Independence and Early Retirement?

I have seen some forum posts and articles among the early retirement community about the proper terminology to use, and what most accurately describes our goals and situations.

Here's how I see it:

Early Retirement: I consider retirement to be receiving most of your income from investments, and your current spending level is not dependent on any extra income other than your investments. This is not to say that you don't do anything to earn any extra money, just that you don't have to.

Financial Independence: You have enough in income from various sources that you no longer are enslaved by what would be called a day job, but you are predominantly living off income still, not savings. But that income may be adsense blog revenue, ebook sales, rental income, online videos, ebay sales, etc. So you are still living off income from 'work' but the sources are varied and are not typical jobs.

So while my long term goal is to be independent of all income sources other than that generated by savings, my current goal is to simultaneously develop alternate streams of income. And I'm well on my way. Keep reading to follow the journey.

- The Money Monk


  1. btw, caught you on Dividend Mantra :) saw your sight - good stuff.

    One (maybe the only) problem I had with ERE was the frugality with respect to the home. I have always viewed this as a major security risk. Living in a trailer is cheap as hell, but if society starts to crack (and it just may in the next 5 years) .. you'll be smart to have your own piece of property outside of any major city center. Preferably with stores stocked up.

    A good 'life system' should be smart in good times and bad. I see a lot of frugal lifestyles as fantastic ASSUMING you live in 'good' times.

    Just food for thought.

    - Ye beneficial Bard

  2. Hi, thanks for stopping by!

    Funny you should mention that, because it is pretty much the only reason I purchased a house instead of renting. I am very big into preparedness and self-sufficiency, and in a lot of ways those ideals mesh perfectly with the idea of financial independence and early retirement. In both cases the goal is to be free from having to rely on outside systems of support.

    Whether that support is the paycheck from a day job, or the food from the grocery store.

    So yeah, I have food stored and am working on turning my home into something of a homestead. Not only will that prepare me for whatever turmoil our country is heading for economically, but it will help me live more cheaply even if nothing bad happens, which will get me to FI even faster!