1. Saving and financial independence
Daniel Folkinshteyn, PhD
Money 101 | finance-lectures.com

2. Learning objectives Define financial independence
Describe spending and saving ratios
Model path to financial independence
Distinguish between needs and wants
Describe benefits of financial independence
Money 101 | finance-lectures.com

3. Money flows other people Income Debt stuff financial independence
Assets
Money 101 | finance-lectures.com

4. Money flows over time
Money 101 | finance-lectures.com

5. Quiz 1
How many years does it take to reach financial independence under these conditions?
Financial independence:
asset returns >= spending
Money 101 | finance-lectures.com

6. Control variables Rate of return Savings rate
Money 101 | finance-lectures.com

7. Needs vs wants Continuum: an example of shelter Outside Tent Car
Mobile home
Shared room
Solo room, shared quarters
Solo apartment
Shared house
Solo house
Mansion
Pay yourself first
Lifestyle inflation
Money 101 | finance-lectures.com

8. Quiz 2
If you have a 50% savings rate, how many years does it take to reach financial independence?
Money 101 | finance-lectures.com

9. Model caveats Time increasers Time decreasers Some money in cash
Limitations of tax-advantaged savings vehicles
Variability of rate of return
Time decreasers
Your income is likely to grow
Rate is relatively conservative
Money 101 | finance-lectures.com

10. Benefits of financial independence
Insulates from job market ups and downs
Reduce or eliminate financial anxiety
Enhanced ability to remain ethical in the face of financial incentives to do otherwise
Opens options for more rewarding but less remunerative occupations
Reduces downsides from taking risks on new ventures
Money 101 | finance-lectures.com

11. Additional reading
The Millionaire Next Door: The Surprising Secrets of America's Wealthy
by Thomas J. Stanley
Money 101 | finance-lectures.com

12. Attributions
All images, unless otherwise noted, are sourced from pixabay.com or Wikimedia Commons, and are licensed under CC0, public domain.
Money 101 | finance-lectures.com