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Financial Escape Velocity (FEV) Vs. Financial Independence (FI). Understanding the nuances
In the world of personal finance, there are two milestones people constantly chase: Financial Escape Velocity (FEV) and Financial Independence (FI). They might sound similar, and they’re often confused, but they’re actually quite different — and understanding this distinction can change how you approach financial freedom.
Let’s break down each concept, see why Financial Escape Velocity is exciting but a bit shaky, and explore why Financial Independence might be the more resilient path to a life unbound by financial stress.
Financial Escape Velocity: When Your Investments Take Over
Imagine this: you’ve built up an investment portfolio that generates enough returns to cover your annual living expenses. No need for a paycheck, no side hustle — just your investments taking care of everything. That’s what Financial Escape Velocity is all about: your portfolio covers your lifestyle costs for a year, on its own. When you hit FEV, it feels like your finances have reached a thrilling momentum, breaking free from the need for active income. I reached FEV for the first time during October 2024. And I repeat: for the first time, because I’m aware I might lose it in the near or far future at any time.
