Attempting to accomplish financial independence (FI) can be very psychologically challenging. It can feel like a major uphill battle if you have many years of saving and investing ahead of you. This is often compounded not only by self-doubt but from the misgivings of other people you explain the radically simple approach to passive income or early retirement to.

At first, It can be psychologically taxing knowing that you are saving and investing a significant proportion of your earned income for a future date. You have to make decisions about where to cut your expenses and force yourself to think more consciously about what you spend your money on.

Progress can seem slow and your investments volatile. In the early days, you really have to commit to the facts, stats and logic of your approach without any conclusive evidence. So, you might wonder at what point do you start to see the payoff? When do things start to snowball?

What Can Make The Financial Independence Journey Difficult?

It’s incredibly easy to compare yourself to others during your journey to financial freedom both in terms of their net worth and savings rate. You might feel that you have to cut even more things out of your life to match how much other people are saving.

In fact, I feel the vast majority of people get hung up on their savings rate and I know I have fallen into this psychological trap. It’s very easy to set an SR % goal but even easier to miss it. This is because your spending can be as volatile as the stock market because of unexpected payments and things that are difficult to factor in e.g. car repairs.

I prefer to make a reverse budget, identify how much I can save based on my income and spending behaviours (which are pretty well trimmed now). Following this, I set a monthly investment target that balances my financial goals with my lifestyle goals.

Simply, tracking my net worth rate ensures that over time, I am investing this amount and maintaining a steady cash surplus. All whilst living my best life. This has allowed me to triple my net worth in 4 years, whilst also taking a career break to travel in 2020.

What Makes The Financial Independence Journey Easier?

What I have also discovered is that by creating systems and habits in relation to your long-term goals, this drives positive behaviours. For example, having this long-term goal is especially important in driving you to:

• Increase your income
• Develop a healthier approach to money
• Understand the benefits of minimalism (e.g. needing less makes you happier)
• De-clutter your life and focus on what’s important.
• Understand what makes you happy
• Stop buying things that don’t make you happy.

The things that can ultimately make this a little easier are tracking your expenses and tracking your net worth. I write the breakdown of my net worth in an excel spreadsheet once per month.

As long as you track your net worth and continually keep to an investment amount each month, things will come together. It’s this approach which has doubled my net worth outside of my workplace pension. Triple, if you do factor it in.

Do You Need To Know Your Financial Independence Number?

Knowing exactly what your FI number should be when you start your journey is difficult. Your salary, circumstances or approach may change because life happens! You can exert control over it, but predicting what number you want to end up on can be challenging.

Is it worth it, definitely? Especially if you really want to be able to measure your journey to financial independence. It’s easy to get sucked into the nitty-gritty details of your financials, so every once in a while you need a birds-eye view of what’s happening.

Personally, I’ve found having a number to aim for, gives me the enthusiasm to save and invest large sums of money. If I was saving for small amounts of £1,000 or £10,000, this wouldn’t motivate me nearly as much as the dream of financial independence, passive income and the option to quit the rat race.

My Investing Journey So Far

In February 2017 I invested my first lump sum of money. I tentatively invested £1,300 into a stocks and shares ISA. A small proportion of my net worth at the time, which was £21,329.

The next month I invested another lump sum £3,300, then for a few months I kept to my plan of investing £400. After yet more research and which built my confidence Invested the third tranche of £3,400.

So, by August 2017 I was about a 50/50 split between cash and investments. All from a serious philosophical change in how I thought about money. Which stemmed from a number of websites and articles, two of which I can concretely remember:

• Go Curry Cracker
• JL Collins Stock Series

Consistency Is Key To Saving Money

Aside from my fourth £2,800 investment in April 2018 and excluding the other lump sum investments, I consistently invested £400 into the stock market between February 2017 and September 2019.

Due to taking a career break I reduced my investments down to £50 per month from then until today (January 2021). However, even then you can still see a consistent commitment to investing. Which as we will come to see, has paid off.

What Is My Net Worth?

As of the 24th of January 2021 (the pre-payday date, that I update my net worth tracker), I was worth £41,418or £57,366 if you include my workplace pension of £15,948. Which I don’t because I can’t access it until 55.The week of writing this post I’ve just been paid roughly £2,000, so my net worth is actually closer to £60,000 right now. This is in addition to my 5% employer matched pension contribution this month too.

At the start of 2020, I also started to integrate the return on investment into my net worth, after tracking only the book value since 2017. I now update this once a quarter to my net worth tracker. As you can see in just four years, including this year where I only worked 4 months out of 12 I have doubled my savings and investments and tripled my net worth if you include my pension.

The Breakdown

It’s amazing to see how much my net worth has grown since I started investing in 2017, when I was 98.6% cash based, now I am 13.7% cash based and 66% stocks.

As you can see I’m petty cash heavy due to saving for a house deposit but that will just once that’s converted to equity in the future.

However, at present it would also allow me to double down in investments as that can form part of a safety cash buffer.

What’s Changed Since 2017

I can’t believe it’s already been nearly two years since I first documented my financial plan to financial independence. Four years since I first wrote down my net worth in Excel. A few things have changed since then, so it’s time to update this plan!

• My salary has increased by £4,000 since I wrote my last plan.
• In 5 to 6 months I will stop adding to my help to buy ISA £200 per month) and focus only on my investments.
• I am now working remotely, so there are some savings there.
• 2021 and 2022 travel will be non-existent or minimal. As a result, I will reduce my main category of expenditure which I would usually spend £3000 – £3,600 a year on.

As a result of this, it’s time for a new financial plan and to alter the trajectory of my journey to financial independence and passive income.

My New FI Plan For 2021 And Beyond

One thing that does seem to have remained reasonably stable, if not less is my monthly expenditure, so I don’t believe I have to inflate my FI number just yet. As a result, of all the above I intend to uplift my investments by £400, from £400 to £800 per month over the next few months.

Currently, I’m investing £600, but once I have topped my Help To Buy (HTB) ISA up to £10,000 I will divert £200 a month into my investments. £10,000 in my HTB will give me a £2,500 (25%) cashback bonus when I buy a property up to £13,000.

Projected Portfolio Values

As you can see below, the extra £8,00 will have a tremendous impact on my portfolio projection and time to FI. Previously it was predicted to take me 21 years to reach a minimum FI number (dotted line) of approximately £335,000. This should now take 15 years and be accomplished by 2036 when I am 44 or 45 (solid yellow line).

These values assume the market will return 7% per year on average after inflation. However, I have also included a projected portfolio value based on the assumption the stock market returns 10% after inflation. This would return £439,895 by 2036.

Will This Change Again In The Future?

Yes, I fully expect these calculations to change again in the future but it feels to unrealistic to factor in potential increases to income now. However, I do expect my income and savings rate to increase for a number of reasons:

• I fully intend to increase my income further by negotiating my current salary with my current employers at least once over the next few years.
• I intend to build up my side-hustle income through this blog.
• I intend to start another blog or online business in the next few years.

This should all allow me to reach a much greater FI number of £450,000. As you can see the trajectory rapidly increases once I actually pass about 2035 to 2037. With the inflection point between interest and deposits crossing over at this time.

This ultimately means I will earn more in interest than I will deposit. By 2040, In theory, I will also earn as much in interest as my portfolio was originally projected

5 Actions You Can Take To Smooth Out Your Journey To Financial Independence

1. You Need To Research Investing

Of course, the first thing you need to do is to start taking investing seriously and do some research if you don’t already have an account. I have some great resources you can use to get there, including my own beginner investing series.

If you want to get there in fewer steps, then download my FREE Ebook which will walk you through the steps to opening your first investment account. There are helpful screenshots and useful tips and hints to make this as easy as possible for you.

In 2020 although I didn’t earn a great deal of income in comparison to a regular year because I quit my job in January to travel, my net worth ultimately trended up because of my investments.

This ultimately highlights that the hard you save and invest now, the easier your life will be in the future. So you should plot your journey to financial independence by using my financial freedom calculator. This will tell you how much you need to invest to have a sustainable retirement portfolio and income.

2. Track Your Net Worth

I’ve talked a lot about tracking net worth and how this is such an important metric. It can help with both your savings and investment goals. You can get my personal net worth tracker for FREE too. You can tweak and change it to suit your needs or goals once you have downloaded it.

I have a range of other budgeting tools you can also download for absolutely free to. These will help you to reverse budget or stress test your finances.

As you can see tracking your net worth is a fantastic way to realise just how far you’ve come. Creating a passive income and being able to quit the 9 to 5 at 45 might seem like an obscene fantasy, so being able to ground your journey, in reality, can make progress seem more real.

3. Negotiate Your Main Source Of Earned Income

It’s important to switch jobs and employers in order to zigzag up the salary ladder. Whilst you can get promotions this often comes with significantly more stress and responsibility. By switching employers you can easily get a 20% pay increase, without any added duties.

With this in mind, you can grow your income by changing jobs, I have some helpful posts for you right here: how to change jobs & negotiate income.

Of course, you can also negotiate your income with your current employer too and this is something I very much intend to do in 2021.

I will openly admit that until my last two jobs I have been pretty terrible at negotiating. I probably could have been earning so much more over the last few years but I did not seek to know my worth or ask for it.

Even as a young person you should 100% not be afraid to negotiate your income. Please remember this! Know your worth and ask for it.

4. Build Your Side Hustle Income

Grow your income and build your side hustle. You will likely get to a stage in your FI journey where you can’t cut any more out of your spending without damaging your lifestyle and neglecting those around you.

Building a second income is a great use of your energy and will ultimately help you build your income when you cannot change jobs or negotiate your income any more. Starting a blog is one way to do that, so please check out my posts on how to build and monetize your blog.

The good news is that even as a beginner blogger you can earn some money on the side. For example, I’ve earned £30 from Awin in one month and over $277 from Interactive offers so far. The return on investment of my time and energy is now beginning to build momentum.

I’d highly recommend Awin as you can earn a commission from linked purchases and also a £30 instant commission when you direct someone to sign up to use Awin. You can use my affiliate link here if you feel like supporting me.

5. Learn & Understand The Stories Of Successfully Early Retirees

For everything else, such as saving money in smarter ways to finding new ways to earn money, then check out my other wealth-building resources.

You should also check out some other money and financial independence bloggers to help you on your own journey. Essentially knowledge is the most useful resource and understanding how others have accomplished incredible money feats is something we definitely need to do.