From Location Independence to Financial Independence

October 20, 2019

Location independence is a huge unfair advantage in the quest for financial independence.

Financial independence is about increasing your saving rate. You can do so by decreasing your expenses or by earning more, or a bit of both.

Most people assume that traveling is expensive. It’s true, if you’re tied down by geographical or time constraints: as long as you don’t overly care where you live, there is always a way to find a cheap ticket and an inexpensive yet decent accommodation.

Here is how I do it. I open Skyscanner, I enter my departure location, and I ask the website to search anywhere for cheap tickets over a whole specific month.

Then, I write each cheap destination on the list in Airbnb and I add a few criterias: an entire place under $500 for a whole month, with a kitchen, Wi-Fi, and a washer.

The results are quite amazing. It’s quite common to find whole places rented under $400 for tickets under $100. Then you just need a health insurance and a budget for food. It’s not hard to leave under $800 without sacrificing your living conditions.

Living on less means you can invest more money in things you care about: funds, time, or experiences. I choose location independence because it gives me more time to work on my own business, and I am not rich by any means.

If you spend $1,000 a month while earning $3,000, that’s a saving rate of 66%. Not bad. At an annual interest rate of 4%, that’s $300k in funds over 10 years, including $50k in compound interests. $750k over 20 years. $1,400k over 30 years.

Now, the average annual interest rate of a Vanguard-like index fund is closer to 10%. Personally, I would consider myself financially independent with $500k invested. I’m 25, so I’d only need 12 years to reach this position in these conditions. 9 years on a 75% saving rate. 7 years on a 80% saving rate. 6 years if you were to earn $6k per month. See how impactful decreasing your housing costs would be?