3 Years Into An FI Journey

One day about 3 years ago I sat down and fully tallied up my Net Worth – loans and all.  It was somewhere around -$43,000.  This came after I had taken the summer off, moved to a new state, and had myself a little creative sabbatical.  It ended with a return to work, and, in desperation, a way to regain the life I’d been living the past few months.

It’s what led me to starting a budget and fueled my drive to be as efficient as I could with what I made.  Eventually I stumbled across FIRE…

FIRE Basics

There are plenty of other blogs that can tell you all about FIRE, so I’ll keep it short and sweet.

FIRE = Financially Independent, Retired Early

I’m all about the first part, the FI.  Financial Independence happens when you have enough income producing assets to fund your lifestyle for a long period of time, removing the need for a job.  You can do this with an investment portfolio, in which you need at least 25 times your annual expenses saved up.*  Or you can do it by owning rental properties and collecting rent, having a stake in a business, owning a blog – the point is not being required to be in a place for 50 hours week because you need the money.  Different people prefer different paths, and different paths have different stages.


First, there’s Accumulation.  Earning money and purchasing assets like stocks, bonds, property.  Building income streams separate from a traditional job.  At a point in the accumulation stage you get FU Money.  FU Money isn’t enough to fund your expenses for life, but it’s enough that you could go for a pretty long time without having to work.  It allows you to take more risks, have more control over your work-life balance, and reduces the stress associated with job security.

Next is Drawdown, or spending your assets.  This can be selling off portions of your portfolio, collecting rents, living off dividends, spending income from side projects, and even working part time.

Why I FI

The key is not to think of it as just replacing income.  It’s about having control over how your lifestyle is funded.  That’s not to say that saving up enough money means you’ll never have to work again.  Nothing in life is certain.

If life is a game, you want to give yourself the best odds you can.  More options, more control, more flexibility all = better odds to adapt to whatever happens.

It’s why I don’t really reference the RE part.  I’m not concerned with never working again.  I love working – on things I think are meaningful and important.  I just want more time and energy to do that work.

So I’m about 3 years into this journey.  What has it done for me?  Well, every payday I worry a little less about money.  Not because my bank account gets reloaded, but because I know that every $25 I save is a dollar a year I don’t have to earn again.  I know that I’m building more choices and opportunities into my life.  That every year my income goes up and my spending stays the same and I’m happier is proof that money itself doesn’t buy happiness.  It’s just a tool.  You can use it to buy whatever you want.

*More notes on Calculating Your FI Number:

The Trinity Study is a common starting point for figuring out how much you need on the basis that you can generally withdrawal at least 4% of your portfolio (with an asset allocation of 50/50 stocks and bonds) annually (often referred to as the 4% Rule of Thumb – see this awesome post by Mad Fientist (and be sure to read every article he’s ever written) for more on safe withdrawal rates. and you have a 90%+ chance of NOT running out of money.

The great thing about this equation is that it assumes you’re living entirely off your investments, aka:

  • Not earning another dime in your life time
  • Never collecting social security
  • Never adjusting spending habits to changes in the economy
  • Never receiving money from inheritance or family

What this means is that it helps to have a flexible, sustainable lifestyle.  Not only will it get you free more quickly, it will help you preserve that freedom.

Back to the math.  To find out much you need, take your annual expenses and multiply by 25 (hence the 4% annual withdrawal).  As for how to go about saving that much in a relatively short amount of time, all I can tell you is to check out The Shockingly Simple Math Behind Early Retirement by Mr. Money Mustache.  This is one of the first articles I read about Financial Independence and has changed my life (like I imagine thousands of other people’s as well).

25 times your annual expenses is a great starting point.  It’s easy, back of the napkin math.  Your final plan will likely be more complex, but quickly getting a number is really motivating.

Ignore anyone who says that to “retire” you need to replace 85% of your income.  You know what that assumes?

  • You’re only saving 15% of your income (and spending the other 85%), which means you’ll probably be FI in your 60’s or 70’s so all this is moot.
  • As your income rises, your spending will.  Hint:  If your income goes up, you can also save it.  You don’t have to spend it…

It’s also a much more complicated math problem to figure out.  If you make $40k a year and don’t save anything, meaning you spend $40k a year, you need $1 million to retire.  See how easy that was?  Track your spending and see you only spend $30k a year, and you only need $750k.  Even easier… 😉


One thought on “3 Years Into An FI Journey

  1. So much yes! Every payday is a step closer to achieving your goal. 🙂 FIRE doesn’t happen overnight, of course, and I think that’s why so many people deride it. But hot damn, does hard work pay off!

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