Is it possible to become Financially Independent and Retire early. What would the road to financial independence look like for a Game Developer. For me it looks like the ability to not have to go to work and make any game you want to. You can work with any teammates you want to. If you want to take a break and go for a walk you can. If you wanna go live in another country you can. What were gonna look at in this article is whether that could be possible for a Game Developer.
As an Indie Game Developer it might sound even harder than if you were a Game Developer working for a big company making $80,000 - $120,000. You might be thinking it's impossible to making that much as an indie developer and i would say you are right. Unless you get lucky and make a hit you aren't gonna be making anywhere near 100k. You should be looking at best 10k a year ( Source). How then would it be possible to become Financially independent as a Game Developer.
To become Financially Independent and Retire Early your spending just need to be less than your total passive income from all sources.
Let's look at some real numbers for that statement so we are on the same page. Let's say there are two people. One makes 100k a year, let's call him Bob. Another makes 20k a year, Let's call him Toby. At first thought who is closer to FIRE? It's actually impossible to determine with just those numbers i gave you. You are going to need know one more variable for Bob and Toby. You will need to know their percentage savings. Below is all the information needed to calculate how long they need before Fire.
Makes 100k a year
Saves 10% per Year
Has a 30k car
Owns a 1/2 million dollar home that is not paid off
Makes 20k a year
Saves 50% a year
Owns a cheap car that gets him where he needs to go
Owns a 20k home that is paid off
With all this Information we can clearly see who will retire earliest. Looking at Toby and Bob the first thing of interest is their homes. One has a 500k investment while the other has money being saved every month from not having to pay rent. Every Dollar Toby doesn't spend on a house he saves. He is able to live very cheaply by not having a car payment or house payment. Bob on the other hand spends every dollar he makes forever insuring he will never FIRE.
At Toby's Saving Rate It would take him 15 years to Retire Early. To calculate how much Toby would need we just need to rely on the 4% rule. If Toby is currently is able to live off of 10k a year than he will need $250,000 to retire. 10,000 / 0.04 = $250,000. Using a 7% return from the stock market Toby would make $260,000 in 15 years contributing 10k a year.
Bob has a much lower savings rate since his car and home takes up a big amount of his pay check every month. Bob needs $2,250,000 to retire and be considered safe enough to last for his whole life, barring the great depression at the beginning of your retirement. $90,000 / 0.04 = $2,250,000. Using a 7% return from the stock market Bob would make $2,354,852.65 in 41 years contributing 10k a year.
How long you have until retirement is really just a factor of your percentage savings and yearly expenses - passive income. If Bob also saved 50% he would only need 15 years to retire as well. The higher percentage of his income he saves the more quickly he will retire. The problem is that most people let lifestyle inflation happen. When you start making more you start spending more. This is the biggest detriment to Bob.
My calculations all assumed that both had no passive income. If Toby had a side hustle that was passively making 5000 a year (like games) He would really only need to be spending 5k a year annually. That makes his savings percentage even higher. Since Toby is now saving 75% instead of 50% he would only need around 125,000 to be able to live off his side hobby. Putting away 1,250 a month that would take him 7 years.
Being able to FIRE comes down to being able to live off a smaller percentage of your income, that means having another source of passive income or being frugal.
I have not fired yet. This article is speculation for whether or not Game Developers would be able to FIRE. I believe it is possible if you understand some of the rules we talked about in this article. It is a lot easier for a salaried employee than it is for an indie but once you build up a tail of games then you should start to get a more stable passive income which allows you to have higher savings percentage which in turns lowers the years until retirement.