No telling what is in store for us in the next year. Out of curiosity, what are your milestones for financial freedom? I’d define this as unplanned loss of employment….your choice or theirs.
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Spend less. Avoid lifestyle creep and save more. Put the savings to use: max out tax advantaged retirement accounts, payoff student/auto/credit card debt, build up a comfortable emergency fund, save for a mortgage if that's your lifestyle, and from there start chucking all additional income into low risk index funds for the rest of your career while building up your emergency fund as your risk tolerance changes. As long as you spend less than you make and prioritize your savings in that order, you're better positioned than 95% of people to weather a layoff.
For me "comfortable emergency fund" = 12 months living expenses, which is probably overly conservative since I'm a renter in a 1Br apartment with no dependents and no debt. And because I've consciously resisted lifestyle creep, 12 months of living expenses = 4 months of post tax salary. Although everyone is in a different position and I'm certainly on the easier end of the spectrum.
This puts me in a position where I'm ready to walk away from this job whenever I want once my golden handcuffs vest.
Lifestyle creep is easy to normalize. Even little things like buying lunch or a coffee everyday add up. In the parking lots, it's a nice reminder when I see 20 year paid off beaters parked next to luxury cars that probably have a 1k/month payment. Or when I see my bosses boss--who makes god knows how much more money than I do--unpack their lunchbox instead of spending $12 at Shade. Choose the money in your pocket over the new toy and little conveniences and you can 100% get to a comfortable position for your risk tolerance on an EM salary.
HODL
All I need are some tasty waves, a cool buzz, and I'm fine.
Massive stash of coke. Pull the trigger when stuff hits fan.
Dave Ramsey is a good speaker/podcast to listen to if you beginning a path towards financial freedom. He has baby steps. He keeps it simple.
Minimalism is another topic worth listening to. There are people who may take this to an extreme (e.g. they only own 100 things) but I like the discussion regarding whether you need all those material things you can purchase. It keeps you mindful on how you spend your money and your lifestyle.
Regardless where you work, you should spend your money thoughtfully. No one is perfect at this but you can always improve. Financial freedom would provide a more stress free lifestyle.
Hope everyone has a positive new year. Remember what is important. This time of year is a good time to reset and remember your priorities.
Agree that job security with EM isn't what it used to be. Here are some major financial milestones I think it's worth trying to hit in rough order (this is from a US perspective, but probably applies in a general way to other "high cost" countries):
- $1k in cash saved in an emergency fund.
- No credit card debt.
- 3-6 months of expenses saved in cash.
- Paying into (and ideally maximizing) tax advantaged retirement/savings accounts (401k, IRA, 529, FSA etc.).
- All debt paid off besides mortgage.
- Making post-tax investments (general wisdom for this is index funds, but you do you) in addition to tax advantaged savings.
- Invested savings (excluding home equity) at 25-30x annual expenses - at this point you're theoretically FI, though bad stuff can still wipe you out - especially in the US thanks to our medical system.
- Paid off mortgage - entirely debt free.
- 25-30x annual expenses in post tax investments
- $5m+ in investments (in 2022 dollars) - this is definitely FI. If you hit this milestone at any point, there's really no reason you should go broke in the future barring some sort of financial apocalypse. If you do it's probably your own fault.
2 years salary in accessible investments. Extra bonus for sizable 401k and 529 balances.