Early Retirement

Financial Independence – 6 Pathways to Retire Early

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According to Gallup research, the average American expects to retire by 66 years old. However, many of us dream of winning the lottery or somehow making enough money to stop working much sooner than that. This dream is known as financial independence, or the ability to live off of investments and savings instead of relying on income from a full-time job to sustain our lifestyles.

If you aspire to retire early, or at least earlier than your mid to late-60s, then here are 6 excellent ways to achieve financial independence by your 50s, 40s, or even 30s.Financial Independence

Debt Will Kill Your Chance For Financial Independence

When it comes to debt, the average American household is far, far away from financial independence. The Federal Reserve reports that the average family has $137,063 in debt (including mortgage), or $16,883 in credit card debt, $29,539 in auto loan debt, and $50,626 in student loan debt. These figures are very troubling to see, especially considering the average annual household income is just $59,000.

Unless your debt has a supremely low interest rate (2-4% on auto loans, for example), you’ll want to tackle your debts ASAP to get back on the path to financial independence. Typically, you should pay off debts with the highest interest rates first (probably credit cards or payday loans) then increase your monthly payments on other debts that have comparatively low interest rates. Since credit is essential for many aspects of our lives, you should eventually treat your credit cards exactly like debit cards by paying off your statement balance in full every month to end the cycle of debt once and for all.

Build Your Emergency Savings Fund

Studies have shown that just 39% of Americans have enough cash to cover a $1,000 emergency. If you’re part of the 61% of Americans who would get a loan or put an unexpected expense on their credit card, how do you expect to achieve financial independence if you have to borrow money for a relatively minor expense? When it comes to home repairs, auto repairs, medical bills, and even veterinary bills, $1,000 might actually be on the low end of what you’d have to pay to fix the problem!

Fortunately, the solution to this is pretty straightforward: put away some money each month into a separate, untouchable savings account ($20 per month or $100 – it doesn’t matter as long as you’re consistently saving). Until a true emergency actually happens, pretend that money doesn’t exist or doesn’t belong to you so you’re not tempted to dip into your emergency savings for something routine like bills or credit card payments.

Protect Your Finances Against Social Influences

The old adage about “keeping up with the Joneses” is unfortunately all-too-tempting for many of us, even people who are generally good about consistent budgeting and saving money. If you have friends, family members, or even a spouse who likes to splurge without much concern for how their actions will impact their financial futures, then following along with their spending behaviors can be toxic for anyone who wants to achieve financial independence someday.

Obviously you don’t want to cut off contact with these people, but you should develop strategies for mitigating the influence they have over your spending habits. For instance, you could ask your splurge-happy friends to come over for a potluck meal at your place instead of going out to nice restaurants and bars. If your spouse is the problematic spender, then take time to discuss financial independence plans with them and brainstorm ways to achieve financial success together.

Expand Your Investment Portfolio

Investing conservatively in bonds is a good way to protect yourself against market downturns, but this strategy also makes it difficult to be able achieve full financial independence from this portfolio. Alternatively, you should strive for a dividend portfolio, which is comprised of stocks that pay out monthly or quarterly dividends to shareholders.

If you want to create a perpetual money machine, then dividend investing is your golden ticket to financial independence. This investing strategy allows you to grow wealth and create a passive income stream through the dividends you receive from your shares on a regular basis. With dividends, you don’t even have to sell your shares of stock to see financial gains – instead, you receive dividend income or little chunks of change all year-round, which can produce a nice income stream if you add enough dividend-paying stocks to your portfolio.  

Optimize Your Tax Responsibilities

True wealth doesn’t come from your paycheck – it comes from your overall financial strategy, which includes how much and where you invest your money. Tax-advantaged and/or tax-free retirement accounts like Roth IRAs and 401(k)s are great examples of this: someone who makes $70,000 per year and focuses on savings will have exponentially less money than someone who also makes $70,000 per year but maxes out their 401(k) and also contributes to a Roth IRA.

Other ways you can achieve financial independence by optimizing your tax situation include: investing in property (real estate appreciation is a fantastic way to grow wealth over time), contributing to a health savings account (HSA), and taking advantage of tax deduction opportunities, such as charitable donations.

Take on Side Hustles to Reach Financial Independence

A final pathway to financial independence involves earning more money by working more. This may seem like a few steps backwards, but in reality, it’s the perfect strategy for anyone struggling to cut even more expenses from their already tight budgets. If you’re living at your means and don’t have much wiggle room to trim your budget, how will you free up enough money to divert into wealth-accumulating investments?

Two words: side hustles. These include everything from driving for Lyft or Uber to pet-sitting, blogging, and much more. Websites like Fiverr can help you find freelancing gigs online, or you can advertise services locally to generate more income beyond what you earn at your current job. Side hustles don’t have to be permanent additions to your working schedule (especially if you already work 40+ hours per week), but even $200 extra per month going into your investment portfolio can significantly boost your chances of achieving financial independence later on.

For more information on financial independence, visit my early retirement page.

I'm a dividend growth investor who is aiming to retire early in 4 years at the age of 45. My goal is to live off the income my dividend portfolio and rental property produce exclusively and leave the corporate rat race. I hope you will join me in this journey!


  1. Excellent points Blake. I’m trying to retire by the time I am 55 or about 15 years from now (give or take). My student loans are at a very low 2.6% interest rate, but I’m trying to pay them off anyway before I hit 40. Other than that, I have my mortgage and I’m planning on buying a second home. The house is currently on a 30-year plan, but I might try to pay it off in 15 years.

    I’m struggling in the emergency funds department. I keep using the money. But, I’m going to try and set aside $1000 for emergencies, and then contribute around $50 a month to build it up some more.

    Early retirement is a dream that we can make happen with enough determination, consistency and hard work.

    Good post.

    • Blake

      Thanks DP! Sounds like you’ve got a good plan!

      The emergency fund is very important! If it were me, I’d hold off investing with any new money until I got that filled. I’ve had to dip into my emergency fund several times over the last few years. Doctor and hospital bills unfortunately happen quite often for us. Its a great comfort having those funds available.

      In fact, its not a bad idea to get your emergency fund to a point where you can pay off your health insurance individual out of pocket maximum. Our’s is $7,500 this year. One $300,000 hospital visit helped us hit that out of pocket maximum quickly.

      Keep saving and investing, we’ll reach that early retirement dream sooner than we realize 😉