I’ve proven that literally filling up two bank accounts didn’t make me any happier than when I had half of that. Or a quarter of it. Once my basic needs were met (plus snowboarding) and I was to enjoy certain hobbies and interests, I didn’t need much else. I still don’t. What has made me the happiest in the past ten years? New experiences. Hobbies. Friends. Family.
That proves that the marginal utility of money is a real thing.
My goal is to be financially independent in order to spend my time as I see fit. I want to be snowboarding in the winter and paragliding in the spring, summer and fall. I want to ride my bike for fun and exercise. I want to stay fit and healthy as I age so I can continue to do these things for years to come. My parents are getting older and I want to help them when they need it. I want to spend time with my sister and niece. Make new friends and socialize with people who share similar interests. I want to keep flying RC’s and share the great hobby that provided so much for me. Listen to music as much as I want. Learn to play the piano. And last, but certainly not least, find someone to share my time with.
My ideal future does not include deployments to dangerous countries, or jobs that require me to move to places I don’t want to live in. It doesn’t include excessive housing, fancy cars, or all inclusive resort vacations.
My ideal future does include four seasons, hobbies and activities, family and friends and socializing like we’re meant to. It includes adequate rest and unlimited recreation.
I want to be financially independent and retire early. Let’s do this.
I expect my employer to bid and win contracts in terrible places. I’ve anticipated this for a while, and after my FI-piffany I stayed deployed in Afghanistan over the last year and a half to maximize the stash. Eventually, my employer will want me to deploy again and I simply won’t go*. Ain’t happenin’. Well, I’ll have to go if I want to keep my job, but I won’t have to keep my job, because of FI.
*I’m actually going to leave before they ask me to go again. I don’t want to be one of those people who acts like they will deploy again, but quit when it’s their turn.
Replacing the paycheck
In the simplest of retirement strategies, I’m following the 4% rule guideline which comes from the Trinity Study. A 4% withdrawal rate on a stock dominated portfolio will historically provide 30 years of income without completely depleting the portfolio. That means a portfolio value of more than $0 after the 30 year period.
Trinity Study definition of success:
Any money left after 30 years = Win.
Portfolio depleted before the end of 30 year period = Fail.
These figures assume no benefits from outside income e.g. hobbies, side hustles, 401(k) income, or even social security*. It is strictly the historical success from one’s taxable investment account.
Put simply, once you have 25x annual expenses invested you are financially independent. Conservative types like me will strive for 33x.
Early retirees are unique because they will most likely enjoy a 50-60 year retirement. Clearly a 30 year ending portfolio balance of $1 is not the same as an ending balance of $1,000,000. This SuperPlan improves upon the 4% safe withdrawal rate (SWR) by reducing risk and utilizing the entire portfolio, not just the taxable account.
*Even though I don’t factor Social Security into SuperPlan, I have earned enough credits to qualify for it. Icing on the cake.
Math and factual data take out a lot of the uncertainty. Statistics are your friend, and help reduce emotional decision making. A 3% withdrawal rate has a 100% success rate for all recorded 30 year periods and will be the basis of my annual withdrawals. I’m budgeting for $30,000 per year ($2,500 per month) so my FIRE number is $1,000,000. The annual spend rate includes all taxes, insurances, and amortized expenses.
May 2017 Update: 30k is not enough. My annual spending is closer to $40k, so my new FIRE number is $1,320,000
I’ve been lucky enough to have had free housing from 2009-2015, therefore it’s unknown what my actual expenses will be until I move back to the US.
This plan is based off of $3,300 per month while living in Utah and is broken down in Expenses.
Nobody can predict the future. Emergencies, deaths in the family, sudden medical care, and other crises will happen. They won’t happen every year, but when they do, planning for 3% withdrawal rate instead of 4% gives me a ~$12k annual buffer for these things.
My FI number has come and gone, and my FI date is 1 January 2017.
May 2017 Update: I’m still working, but not for long!
The Quit Date
I intend to leave my employer in December 2016 as long as my projected $2,500 per month spend rate during 2016 is successful.
Update: It wasn’t. New FI number is $1,320,000 and I’ve had my last day at work!
There will be two types of expenses (fixed and variable).
Fixed expenses will be things like rent, internet, annualized expenses e.g. season pass for snowboarding, USHPA membership, taxes and insurance.
Variable expenses will be things like groceries, general merchandise, pre-paid mobile phone, restaurants, utilities, recreation, booze, public transit, clothing, gas, etc.
Taxes and insurance are counted as “fixed” because they are relatively easy to predict as an early retiree.
Remember, all money spent has to be factored into the annual spend rate: Taxes, insurance(s), investment expense ratios, any fees of any kind.
I’ll get to the money on page 2.