How to achieve financial independence

20 January 2023 by National Bank
Woman outside dreaming of financial independence

Financial independence enables you to do what you want and relieves you of the pressure to work in order to pay your bills, mortgage or rent. This short practical guide will show you how.

Invest in you: dedicated to women’s finances

Discover practical tips and tools designed to help women improve their financial independence.

What is financial independence?

Achieving financial independence means no longer having to work to meet your needs. Money no longer dictates certain important decisions.

It enables you to do follow your dreams. It gives you the freedom to:

Being financially independent is not synonymous with retiring. They are two different things, even though they can also go together.

In summary:

  • Retiring: It’s something we do
    A person who is retiring might not necessarily have the means to do so and achieve all their financial goals. For example, they may have to retire for health reasons, but a lack of resources could force them to reduce their spending (and prevent them from travelling or even force them to move).
  • Achieving financial independence means having the means to do what you want
    That same person could retire and achieve all the goals they had set. Like spending the winter in Florida. That said, a person in good health could choose to keep working for enjoyment or opt for an early retirement

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How to calculate how much you need to achieve financial independence

To calculate how much you need to be financially independent, identify what it means for you.

Picturing yourself living a life where money is no obstacle will help you estimate the resources you’ll need to accumulate in advance. The road to financial independence will depend on a number of things, such as:

  • The lifestyle and standard of living you hope to have
  • The compromises you’re prepared to make
  • How much you’ve saved up
  • Your plans

Knowing why you want to be financially independent (whether to spend more time with your family, follow your dreams, etc.) will motivate you to act on it.

Tell yourself that financial independence is attainable. However, it requires a great deal of determination and discipline.

Advice for a happy family life: Share your plans with your partner and children, if you have any, so that everyone is working in the same direction.

Calculate your living costs

To understand what financial independence means in terms of your financial resources, you’ll need to calculate your living expenses.

Living expenses: The total of what it costs you to live for a given period of time, e.g. one year.

To get a good idea of your living expenses, draw up a basic budget:

  1. Take your net income (after charges and taxes)
  2. Subtract what you save
  3. The result is the amount you spend each year

If you want complete financial independence, you’ll need to find a way to replace your income (often employment or investments) to cover your expenses.

How to achieve financial independence

Draw up a financial plan

Your financial plan will guide you step by step towards financial independence. It’s your roadmap.

If you want to stop working (and stop earning active income), you’ll have to earn enough passive income (interest on investments, rental income, etc.) to make up the difference.

Here are a few examples of passive income:

  • Income property
  • Dividend-paying shares
  • Fixed-income securities (e.g. bonds)

Draw up a balance sheet

A balance sheet will help you take stock of your current assets (e.g. real estate, investments, etc.) It’s a snapshot of your net worth, or what you have minus what you owe. Assets less debts.

When you compare what you need to achieve financial independence, you’ll see the shortfall you have to make up to reach your goal.

Build an emergency fund

Building an emergency fund could really help you reach financial independence.

It’s difficult to predict unexpected events like having to stop working because of an illness or having to repair a leaky roof or car part. By setting aside an amount in an emergency fund, you’ll be able to avoid taking on new debt.

Your emergency fund should be equal to 3 to 6 months worth of salary. This amount should be readily accessible.

Manage your debts

Debts are often an obstacle to achieving financial independence. Resolving your financial problems, if you have any, will undoubtedly relieve a great deal of stress as well as help you maximize your savings. 

Pro tip: Pay off the debt with the highest rate of interest first, whether it’s a student loan, a credit card, or mortgage loan.


Saving will help you make up what you need to achieve financial independence. One easy way is to set up a systematic savings plan.

For example, you could program automatic transfers to a savings account the day after your pay is deposited. In a matter of a few months, you’ll have saved up an amount that you can put into a sound investment.

Need a helping hand to manage your money more effectively? Read our article: “How to Manage Your Money Better

Are you familiar with the FIRE movement?

The FIRE movement (Financial Independence, Retire Early) has been gaining followers for many years. It’s a philosophy that advocates achieving financial independence by choosing to live frugally and maximizing savings.


Investing your savings could help you maximize your returns and profits in your quest to achieve financial independence. Depending on your situation, objectives and investor profile, you can choose from many:

Live more simply

By picturing what it will be like to be financially independent, you’ll be able to add or eliminate certain expenses. 

However, if your living expenses and budget show that you cannot achieve financial independence as quickly as you’d like, you could:

  • Reduce your current expenses to increase your savings
  • Reduce your living expenses later 

To do this, there are so many ways of saving, such as setting a budget for groceries.

Would you like more clarity when it comes to investing your money? Read our article: “How to invest money

Financial independence gives you the freedom to make choices based on your wants and needs. It isn’t only for the ultra rich. Would you like to discuss it with us? Contact your National Bank advisor or your National Bank Financial Wealth Advisor. Don’t have a specialist looking after your file?

- Are you wondering how to pay off your debt?


(rhythmic music)


I'll explain in less time than it takes me to do a sun salutation.

All twelve poses.


- Tsk tsk.

We don't say poses.

We say asanas.



All twelve asanas.


(bell dings)


- Credit card, line of credit, student loan, car loan…

If you want to pay off or reduce your debt, we have tons of tips and tricks to get you there.

All you have to do is take it step by step and reduce your debt…


- And your stress.

- You are causing me stress.




- First Asana, Mountain.


- Even if you have a mountain of debt, breathe gently through your nose...




...and make a list of all your debts, including the amount, minimum monthly payments and interest rate.


- Second Asana.


- You don't have to announce every single po-- Asana.

The second step is to make a plan, over a year, for example.

That will allow you to evaluate how much you should pay back per month in order to achieve...

- Nirvana!


- Your debt with the highest interest rate should be paid off first, because it costs you more.

You have different kinds of debt with the same interest rate?

Pay off the smallest one first.

It'll be gone sooner and that's...

- Relaxing!


- Relaxing.

Above all: always make your minimum payments, every month, for all your debts.

Your credit score will thank you.


- Third Asana!

- Now you're really stressing me out.

Make a budget to see where you can cut your spending.

If your budget is tight, change your spending habits.

You can repair your broken devices, become a bargain hunter, buy used.

You can also consolidate your debt.

That means asking your bank for a loan to bring all of your debt together into one monthly payment, often at a lower interest rate.

Talk to an advisor about it.

Even if you reimburse all your debt, try to put some money aside for emergencies.

Then, you can think about saving and investing.

And even once your debt is under control, it's important not to create more.


(waves crashing)


(bell dings)


I won!

- It wasn't a competition.


- It was, literally, a competition!

Let's go.


- Nah. I'mma stay.


(bell dings)

- You asked: “How can I save my money?”




I’m going to explain faster than I can make a balloon animal.

If you have debts, you want to take care of those first.

Pay off the ones that cost the most, that means the ones with the highest interest rates.

You want to take care of those before they blow up.

To save, you need a savings account.

Huh!... The word savings is in the name.



- Convenient


- Let me explain the difference between savings and investments.

Savings is money that you put aside.

Investments are savings that you want to help grow.

Saving is a habit.

Start with a little every month,even twenty-five dollars is a start.

But be consistent.

That way at the end of the year when you check your account you’ll be like:

“OMG, who put three-hundred dollars there?”


- Oh, wait. That was us.


- Systematic Savings.


Discipline not your strong suit?

It’s ok. Systematic savings can really help.

It’s a service offered by your bank to put money in your savings account automatically.

You set it up online and then the amount you select is put aside at a frequency you decide.

You just set it up and forget about it.


- That’s great, because I’m good at forgetting.


- Yeah, I thought so.


It’s important to have a safety net in case of unexpected expenses.

That should be your top priority.

Like, for example, your fridge breaks down.

You want to be able to replace it without completely ruining your budget.

Now I don’t want to burst anyone’s bubble...


[Balloon burst]


Uh, but ideally you want to have 3 to 6 months of expenses saved up.

And you know what they say, they bigger the cushion, the better the...


- Sofa!


- And you want to be comfortable in case of any unexpected expenses.


Why don’t we check on that balloon animal.

Oh, a snake!

Very ambitious.


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Invest in you: dedicated to women’s finances

Discover practical tips and tools designed to help women improve their financial independence.