This post was originally published in Feb 2018. The featured image was taken at work— my coworker had a manic episode.

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One of my favorite movies of all time is American Beauty. The 1999 award-winning film stars Kevin Spacey who played Lester Burnham, a 40-something guy who hated his job and was on the brink of a mid-life crisis. The inflection point was when he saw his daughter’s gorgeous 16-year-old cheerleader friend, Angela Hayes (Mena Suvari), perform a half-time dance routine at a high school basketball game.

Lester becomes so infatuated with Angela that he starts having sexual fantasies about her. He became obsessed with youth and started to live his life like he just graduated from high school.

And when he was told that he was about to get laid off, he instead blackmailed his boss for $60,000. He then quits his relatively decent-paying job choosing to work as a crew in a fast-food chain instead– the position with, in his own words, the least amount of responsibility.

But what significantly caught my attention is the scene where Lester Burnham contemplates in his cubicle after seeing a reflection of his image on the monitor, which resembles a guy trapped in a jail cell.

With the numbers on the spreadsheet forming the jail bars in his mind, it’s pretty obvious that he felt imprisoned by his job and wanted an escape. A feeling that many people can sympathize with.

Are you in the same predicament as Lester? Do you want an escape?

No, I’m not telling you that you should quit your job and start chasing 16-year-olds like what Lester did. Far from that. If you’re like many people in dead-end jobs, you probably dread that messy, stinky, disgusting, abominable, frightful (I’m running out of adjectives here) square footage of your cubicle.

What if I tell you that there’s another way, a better way that doesn’t involve blackmailing your boss to freedom?

Perhaps you don’t really dread going to work. You just want to pursue things that matter to you and not your boss. Many people crave the freedom of not having to answer to other people on every decision that they make,  stopping them from achieving their dreams, and robbing them of the valuable time they need to fulfill their goals. Work is better when you don’t need the money.

There’s only one answer.

It’s called Financial Independence.

There’s a lot of misconception about being “Financially Independent”. Your 18-year-old who recently moved out of the house is not anywhere near F-I. He just transferred his dependence from you to his employer.

I may have misled you. But becoming a millionaire would not necessarily make you financially independent either. I may be worth more than a million dollars, but I’m not financially independent just yet. Being F-I is actually a much better state to be in!

Here’s what Wikipedia has to say about the topic.

Financial independence means you have enough wealth to live on without working. Financially independent people have assets that generate income (cash flow) that is at least equal to their expenses… A person’s assets and liabilities are an important factor in determining if they have achieved financial independence.

If there is a mathematical formula, it can be summed up into the following equation:

F.I. = Passive Income >= Expenses

The key is to be able to generate enough passive income that meets your expenses. Examples of assets that generate passive income include ownership of stocks, bonds, rental properties, patents, royalties, book deals, etc. Notice the importance of having a “passive” income stream here. An active income stream from self-employment won’t do here. You may be independent of an employer, but you’d still be dependent on your job. I hope not, but on any given day, you could end up in the emergency room severely jeopardizing your ability to generate income.

It doesn’t take a rocket scientist to figure out the relationship between Passive Income and Expenses. If you analyze the above equation carefully, you should be able to infer the following:

The fastest way to Financial Independence is to increase your passive income AND lower your expenses!

You should take advantage of the power of compounding interest by substantially bumping up your monthly retirement contribution. And the easiest way to be able to do that is to cut down your expenses.

Here’s a spreadsheet that won’t imprison you. Rather, it somewhat does the reverse– it tells you exactly how much you need to save to make your savings last a lifetime. In that way, you know exactly when to quit the rat race. It should be easy enough to use because it’s color-coded– just change the values in the green fields with your own and you’ll instantly get the answers in the ones highlighted in yellow.

It’s based on the Trinity Study, very influential research in which three professors backtested a number of stock and bond investment mixes to come up with a “4% safe withdrawal rate” taking into consideration various risk factors, including market volatility and inflation.

Retirement Savings >= 25 x Annual Expenses

As a general rule of thumb, you need to save at least 25 times your annual expenses (not income) before you retire. If you achieve that milestone, you are considered financially independent. The number could be lower if you have other sources of income such as a pension or social security.

Of course, there’s no guarantee that you’ll not run out of money in retirement. In fact, the above study is only based on a 30-year retirement period. But planning your future is a much better strategy than cheating your way to freedom by blackmailing your boss.

May you be able to retire early.

And here’s the most popular scene in the movie.