What is the Phi Equation?

The Phi Equation, as explained by Brad Barrett and Dan Sheeks on the ChooseFI, represents a formula to achieve financial independence. The equation is:

• Passive Income + Sustainable Asset Withdrawal > Living Expenses

This means that when your passive income (e.g., income from real estate, pensions, small businesses) combined with sustainable withdrawals from your investment assets (such as index funds) exceeds your living expenses, you reach financial independence. The goal is to balance these income sources to cover all expenses without the need for active work 1.