4 Simple Steps to Financial Independence

4 Simple Steps to Financial Independence spreadsheet

Breaking down the FI journey 

I know how overwhelming it can be when you first discover FI. There’s so much to learn and do, and the end goal is barely in sight. That’s where this post comes in. 

I’ll help you get the ball rolling and build momentum by breaking the FI journey down. With the actionable tips I’ll share, you can take action and start making measurable progress today.

This was originally a guest post I wrote for Money We Have. I’m republishing it here with permission.

Step 1: Calculate your FI number

Before you begin your FI journey, you’ll first need to figure out your FI number. This is the amount you’ll need in investments to become financially independent.

Your FI number is important because it gives you a target to aim for. It’ll help you track your progress and stay motivated. Thankfully, there’s an easy way to calculate it: 

Your annual spending x 25 = Your FI number

For example:

  • $40,000 annual spending x 25 = $1,000,000 FI number
  • $60,000 annual spending x 25 = $1,500,000 FI number
  • $80,000 annual spending x 25 = $2,000,000 FI number

It’s really that easy! To figure out your own FI number, follow the action plan below.

Why 25x?

The 25x calculation is based on the 4% rule*, which states: if you withdraw 4% per year from your investments, you’re unlikely to run out of money. Mathematically, 25 is the inverse of 4%. So, the 25x calculation is how much you need invested to cover your annual living expenses—using a 4% withdrawal rate.

Action plan 

  • Gather your last 12 months of bank and credit card statements
  • Add up your spending
  • Multiply that number by 25—that’s your FI number

Note: As you advance in your FI journey, you’ll learn there’s a little more nuance to the 25x calculation. Don’t worry about that for now. At this stage of the game, 25x your annual spending is a good-enough assumption.

Step 2: Save

Now that you have your FI number, it’s time to take your first steps towards it. One of the easiest ways to do that is by saving more money. There are plenty of options to accomplish this, but I’m going to focus on tactics that:

  1. Are relatively easy to implement
  2. Save enough money to actually make an impact

Recurring expenses

  • Revisit recurring expenses every 1–2 years.
  • Cancel subscriptions you no longer need.
  • Negotiate with your current providers.
  • Ask for a discount for annual instead of monthly payments.
  • Shop around for better prices.
  • Increase insurance deductibles.
  • Remove extras from insurance policies (e.g. roadside assistance, which you may already get from a credit card).


  • Cook at home as much as possible.
  • Pack a lunch for work.
  • Make a weekly meal plan.
  • Plan your menu around sale items.
  • Make a grocery list and stick to it.
  • Buy in bulk.
  • Eat less meat and dairy.
  • Eat more whole, unprocessed foods.
  • Use and care for your fridge properly.


  • Work from home if possible.
  • Bike, walk or take public transit—even if it’s only once or twice a week.
  • Use a carsharing service instead of owning a car.
  • Carpool with a coworker.


  • If you work from home, write off a portion of your utilities.
  • Minimize energy use (switch to LEDs, hang dry laundry, seal drafts).
  • Negotiate a lower rate when renewing your mortgage.

Action plan

  1. Go through the suggestions above and see how much you can save.
  2. For more money-saving ideas, see:

Step 3: Earn

Most personal finance experts agree—you can only get so far with frugality and saving. Often, earning more is the faster (or only) way to reach FI. This can be accomplished through passive or active means:

Passive income

Active income

Action plan

  1. See if you can earn more passive income by making your money work harder
  2. Think about the ways you can earn more active income, and start working towards them
  3. For more earning tips and resources, see:

Step 4: Invest

If you save and earn more, you’ll eventually notice something wonderful: a growing pile of extra money! But cash in a savings account won’t get you to FI. It’s time to invest that cash.

One of the FI community’s favourite ways to invest is through the stock market. Here are some popular investing options, starting with the simplest.

Tangerine index funds

While these funds have higher fees than other stock market investments, they’re quick and easy to use. You just need to open an account with Tangerine, deposit your money, then they’ll do the rest.

You won’t have to worry about rebalancing, minimum balances, or trading fees. Read the Tangerine investment funds review at Money We Have for more info.

Robo advisors

Robo advisors help you invest in low-cost index ETFs and handle all the rebalancing for you. They’re just as easy to use as Tangerine funds, but are cheaper and offer more portfolio options. Some also include additional services, such as financial planning.

Read the robo advisor reviews at Money We Have to learn more about Canada’s top robo advisors.

DIY investing

While DIY investing requires the most time and knowledge, it’s the FI community’s favourite option. That’s because it’s low-cost, easy enough for most people to learn, and it offers a high level of control.

I recommend DIY investing in index ETFs through a discount brokerage like Questrade. To learn more about DIY investing, see the resources in my free FI School curriculum.

Action plan

  1. Learn about each of the investing options.
  2. Pick the option which you feel most comfortable with.
  3. Get your money invested.
  4. Continue building your investing knowledge with these resources:

Summing it up

When starting your FI journey, it’s easy to feel overwhelmed. By breaking down the steps and starting with easier tasks, you’ll gain motivation and momentum. Before you know it, your FI journey will be well on its way!

I hope this article has given you some ideas to help you start working towards FI. When you’re ready to further expand your FI knowledge, check out FI School: The Ultimate Guide to FImy favourite books, and my favourite podcasts.

Let me know in the comments if you have any questions—I’m happy to help!

Support this blog

If you liked this article and want more content like this, please support this blog by sharing it! Not only does it help spread the FIRE, but it lets me know what content you find most useful. (Which encourages me to write more of it!) 

You can also support this blog by visiting my recommendations page and purchasing through the links. Note that not every link is an affiliate link—some are just favourite products and services that I want to share. 🙂

As always, however you show your support for this blog—THANK YOU!

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  • Reply
    July 14, 2020 at 10:40 am

    That is amazing! I will check out his blog. I was just talking to one of our new young pediatricians and we were talking about personal finance blogs. And I was very blunt. I said “I don’t think generally doctors give good finance advice. You should read non-doctor FIRE blogs. ” There are some good MD finance blogs, but in general I think it’s better to read widely and get different people’s perspective. I’ll direct this young doc your way! Big congrats!

    • Reply
      July 15, 2020 at 11:39 pm

      Hi Dr. Plastic Picker—your comments always delight me. The way you talk reminds me of my doctor friend Jenny. Funny, to-the-point, and lovingly maternal—in an authoritative, doctor-y voice. Ha ha. I love it!

      I’ve always found it odd that doctors have such a bad reputation when it comes to money. Why is that? It’s wonderful that there are so many physician personal finance blogs out there now. I hope they help to influence this new generation of doctors to do better with their money.

      Thanks for sending the new doctor my way. You’re very kind.

  • Reply
    July 14, 2020 at 5:11 pm

    This is great 🙂 I really enjoy Barry’s blog. Happy to see you two are collaborating and expanding your audiences!

    • Reply
      July 15, 2020 at 11:42 pm

      Hi AnotherLoonie—thank you for your kind words and for reading my post! I also enjoy Barry’s blog, and hope that we’ll both gain new readers from each other. 🙂

  • Reply
    Smith Mitchell
    July 17, 2020 at 8:18 am

    Thanks for this post. Financial independence is my goal, your experience is very valuable.

    • Reply
      July 20, 2020 at 8:32 pm

      Hi Smith—thanks for the comment and the kind words.

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