At Modern Family Finance, we believe in helping clients achieve financial independence early when possible to set them on a path to find their best work.
Financial planning for those who want to become work-optional, or achieve financial independence, differs in several ways from traditional financial planning. Here are a few key differences:
Focus on saving: The primary goal of work-optional financial planning is to accumulate enough savings and investments to cover living expenses without needing to work. Therefore, a sometimes unconventional portion of income is usually allocated to savings, investments, and debt reduction.
Understand your expenses: In order to become work-optional, it’s essential to be intentional about your expenses and have a solid grasp on your cost of living. You may consider tradeoffs in your lifestyle to reduce your spending in order to increase your savings goals.
Focus on passive income: Work-optional financial planning places a heavy emphasis on generating passive income through investments, such as rental properties, dividend-paying stocks, and other income-producing assets. The goal is to create enough passive income to cover living expenses without relying on earned income.
Asset allocation: Work-optional financial planning requires a carefully planned asset allocation strategy that can generate long-term passive income.
Retirement planning: Work-optional financial planning is essentially a form of early retirement planning. However, unlike traditional retirement planning, the focus is on achieving financial independence and the ability to retire early, rather than on a specific retirement age.