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You have come to the penultimate step in the 9 step program towards achieving financial integrity, intelligence and more importantly, financial independence. What does all these FI words mean?

Step 8: Capital And The Crossover Point

The essence of what the authors Joe Dominguez and Vicki Robin espouse is simply what I have been referring to as financial freedom. This is the point where your monthly expenses can be met by the passive income generated from the capital in terms of savings and living within your means by following the 9 step FI program in “Your Money or Your Life”.

The authors suggest 30 year US Treasury Bonds as the investment vehicle generating the passive income on the capital amounts that one managed to save from applying the FI principles in the book.

It’s that simple.

Of course, the reality is that most of us (including myself) have only come to realise the power of compound interest and to be financially free after we have wandered through for years in the wilderness without truly understanding what and why we want to be financially independent, why we want to be financially free.

Key Takeaways by Panzer

To reach this point, you would need to apply the dedication, discipline and determination to apply steps 1 to 7. The difficulty is in doing so day-in-day out, month-in-month-out, year-in-year-out. We succumb to the occasional splurges, the once-in-a-while pursuit of materialism that strays back into our lifestyles that derails us from this journey towards financial independence.

For me, my purchase of a car set back my investible capital by $55,000 in capital costs alone. In terms of running costs and maintenance and in the light of escalating fuel prices, I think I’ve probably delayed financial freedom by a couple of years. Even so, this is a trade-off I consciously make to provide more convenience in transporting my family. But the reality is that that sum of money represented by the cost of the car is opportunity costs. It will take me more time to save up that amount from living within my means to build up my investment capital again.

“Your Money or Your Life” has set up the reader well for this stage as the build up was gradual and sustained. My efforts in writing this blog, doing reviews of personal finance books and sharing my thoughts on how I try to apply successfully (and sometimes unsuccessfully) step from my awakening that I want to be financially independent long before 67 and before my daughter turns 21. There are many years in front of me to work, save and invest but I need to be focussed on the daily steps so that I will eventually reach financial independence and live off my passive income to truly pursue what I want in life.

When do you think you will reach your cross-over point where passive income exceeds your living expenses?

Share in the comments and be well and prosper.

Related Articles:

1. Your Money or Your Life - Panzer’s Book Review - Part 1
2. Your Money or Your Life - Panzer’s Book Review - Part 2
3. Your Money or Your Life - Panzer’s Book Review - Part 3
4. Your Money or Your Life - Panzer’s Book Review - Part 4
5. Your Money or Your Life - Panzer’s Book Review - Part 5
6. Your Money or Your Life - Panzer’s Book Review - Part 6
7. Your Money or Your Life - Panzer’s Book Review - Part 7