Life will throw curve balls no matter where you are in your FI journey.

Today’s example comes from my household. The past three years, we supported my mother-in-law and niece on the far coast of the US. That’s 3000 miles of distance and an extra $1500 of monthly outflow. Just last week, we successfully merged the secondary household back into the main household.  (My half of the garage is layered with unpacked boxes still.)

Our FI target remains roughly the same, since it presumes an empty nest and my mother-in-law making her own arrangements. We’ll rethink side accounts for children’s education and other growth, since we expect to become responsible for the niece. The nest will empty a few years later, causing more outflow and less to save/invest during the last push for FI.  RE is more remote again, at least for now.

The six-month-became-twelve sabbatical has run its course. We need more income. Time to explore the new career I’ve eyed the past few jobs: technical management, with people reporting to me. Fallback is technical project work. Side hustle must get real, creating and maintaining websites for local businesses and non-profits.

As I replan, I suspect we’ll appear to regress on our FI journey. Our core investments will continue to grow untouched, which comforts me. Any side hustle income will go directly into further investment, or perhaps paying down the HELOC we still have — one choice to capture in the revised plans. And we should work out possible college undergraduate funds for the niece which won’t interfere with those for the two daughters.

So much new stuff to account for! While we’re in the “long grind” portion of the road up to FI, at least I can’t complain it will be boring. 🙂

Have you realized some major change along the way towards FI, that brought you to replan? How did that feel? How’s that worked out?

Draft zero of FI plan

Here’s a “draft zero” of a Financial Independence plan. Clone it into a document for your own use. Numbers here are representative.


E : annual expense : observed : $36k
W : withdrawal rate : chosen : 4% (US historical)
T : target for assets invested : E/W : $900k
A : assets invested : observed : $45k
I : after-tax income : observed : $45k
S : savings : I-E : $9k
Y : yield on overall portfolio invested : observed : 4%
N : years left to FI : (T-A)/S/(1+Y) : 91
R : savings rate : S/I : 20%


That’s it?

Yup. Pretty straight-forward.

So I just plug in my current expense, after-tax income, assets invested, and portfolio yield, and out comes my target number and how long until I’m there?

Yes. You might want to turn this into a tiny spreadsheet, since you’ll be tweaking it.

OMG that’s a lot of years!

That’s an upper bound. Play around with the inputs to start figuring out what’s acceptable to you. Go explore better ways to calculate this, too, if you want a better estimate.

No, seriously, that’s longer than I’d like.

Yup. You can make changes to the various inputs (observed and chosen) to discover what effects that would have on the numbers. How would you go about making such numbers happen in real life?

That expense number looks low to me.

People can, have, and will live on that (even less), if it’s fulfilling and sustainable. My own E changes as I adjust what is in my fulfilling life and what that costs to manifest.

That withdrawal rate looks high to me.

Go explore the arguments, and decide for yourself. I put 4% here as a defensible default, knowing full well you (the planner) will adjust it to reflect your own (hopefully researched and informed) opinion.

That portfolio yield looks low to me.

Adjust to suit your chosen asset allocation and actual returns. Doesn’t matter whether it’s real estate, stocks, bonds, businesses, or other investments, go observe it.

That income number looks low to me.

Probably. Raising income is one of your prime levers for raising savings, and thus reaching your target sooner.

My expenses will differ before and after transition to FI life.

Cool, go figure out how to adjust the calculations. And what those later expenses will be.  This is, after all, a draft — when you want to change something, you can go out and learn what you need when you need it.  One step at a time, you’ll reshape this into a living plan which reflects your path forward.

… and a controversy

[Essentially part two of last week’s post Two FI/RE equations ….]

Some folks can’t keep a budget because the difference between expectation and reality isn’t narrowing. Those who won’t acknowledge some aspect of what’s real in their life, will have money troubles among the other troubles in which reality rubs their noses.

I promised you a controversy

I assert that making progress on FI/RE requires personal growth. If you’re not growing and changing on this journey, you’re doing it both slow and wrong.


Growth forces focus on what is most valuable, thus dropping what has no (or little) value. Keeping low-value baggage requires effort, and accumulation beyond what would fulfill you, using unnecessarily extra time.

Likewise, being unclear whether there’s baggage breeds nagging fears and “One More Year” syndrome.


Most cultures have some variation of the saying “money doesn’t change you, it merely reveals you further”. The “rich and rude” crowd does exist, yes, counter-balanced by observing similarly large numbers of rude non-rich and polite/stealthy wealthy.

Most major religious and spiritual paths have some canonical list of obstacles to clear. Whether it’s Christianity’s “deadly sins”, Buddhism’s “poisons”, or Islam’s “(acts done by the unrefined) nafs”, these moral failings have financial repercussions. Should we have any which would endanger FI/RE, we’d best address them if we want to reach and sustain FI.

The obvious personal-finance example here is “lustfulness”, provoking divorce and the shattering of nest-eggs, households, and fulfilling relationships. Far more ruinous would be “envy” and “jealousy”, which diverts attention away from your own vision of fulfillment, resets your targets any time someone else does something good, and even brings you to put effort into destroying others’ progress instead of making your own. These produce the “*they* moved the goal posts” complaint so often heard among the financially-strapped.

You can step through your own path’s list. For those who haven’t chosen a path, try the same exercise with perversions or blockages at each layer of Maslow’s hierarchy of needs — see the graphics over here.

Using this insight

Accepting this statement gives you non-financial aspects to add into your FI/RE plan. These support the financial progress by preventing emotional detours, encouraging precision about your targets, and sharpening your vision around what you will manifest in your life after FI transition. Likewise, removing or limiting the effects of character flaws can make FI transition happen sooner and with less resources.

I think it good to give an example from my own FI/RE plan. I aim to correct a flaw I have, which minimizes my networking and my reaching out to friends and neighbors. Having more deep relationships than I have now is part of what my fulfilling FI life looks like. That will require some extra time, effort, and resources to create. That’s in parallel with putting enough investments into place, a typical component of an FI/RE plan. It slightly raises my monthly budget, and thus my nest-egg, reflecting that I do not think FI life would be fulfilling without those extra relationships.

So, am I full of beans here? What adjustments will you make to your FI/RE plan to reflect improving yourself alongside your finances?

Two FI/RE equations

Pete Adeney, in his alter-ego voice of “Mister Money Mustache”, posted a recent blog article “Happiness is the Only Logical Pursuit“. I think it captures a crucial aspect of the journey to Financial Independence.

He digs into Maslow’s hierarchy of needs, and how we can use it consciously to more quickly make choices about what we do. A passing graphic shows a typical consumerist interaction goes about its mischief in throwing us off becoming better people. Then he quickly segues into why producers have more fun than consumers, steps into stoicism, then hops over to a very rough but deceptively accurate summary of Buddhism. I want to focus on this summary, a single simple qualitative equation, to highlight what it means for us.

suffering = expectations – reality

This applies to all forms of personal growth and development, of which an FI/RE journey is merely one expression. By now, anyone who’s read personal-finance blogs and articles (for some time) has come across the principle that

savings = income – expenses

Let’s rewrite this a little:

– savings = expenses – income

I don’t know about you, but my head is spinning with implications from the clear parallels.

Why build and maintain an emergency fund? To suffer less.

Why live within your means? To suffer less.

How do you fit within a tight budget? Expect to do/use/buy less.

Why do people react negatively to changes in their jobs? It’s forcing a change to part of their identity, their reality, while they keep their expectations unchanged (at least at first).

In the Western business world, there are several models of communications and behavioral tendencies. The DiSC model captures the insight that roughly half of people prefer to start making changes by changing themselves, and half by changing others or their environments. These two different modalities operate on altering expectations and reality, respectively. Thus the constant observation that there’s two “competing” camps on progress towards FI, frugality (lowering expenses, changing expectations) and earning (increasing income, changing reality).

Since the net effect we want is raising savings (reducing suffering), we can do any combination of dropping costs and bringing in more money (wanting less and actively changing our circumstances). The competition isn’t between two opposed means of progress, but between two complementary behavioral tendencies.

The existence of the parallel, or rather, that the second/third equation is a specialization of the first, suggests why unhappiness follows folks who retire from work instead of to some preferred activity: financial progress is but a reflection of wider progress. Many cultures have sayings which capture the observations that wealth merely allows someone to be more who they already are, and how you go about building and using your wealth speaks volumes about who you are and how you grew on your journey to wealthiness.

Sometimes determination looks cheesy

I promised myself I’d post here weekly.

This collides with my wife dragging the family away for vacations and other diversions, without letting me in on the plans soon enough to complete a post. The backlog is drained, and I’m not making headway on refilling it. She’s scheduled all manner of odd-hours extra-curriculars for my daughter which only I can get her to. All atop my blogging time. (I suspect she’s still snooping my calendar to double-book me.)


Looks like the household projects go on hold while I resolve the schedule conflicts. Meantime, I’m posting this, under-edited though it be, to meet my weekly objective. I reassess in July, once the sabbatical has hit twelve months, and I see the results of shepherding my investments over the past year.

The Couch-based Business

One afternoon, typing away on my laptop, with a cold drink in reach on the living-room table, I got to musing about what my ideal lifestyle business would be.

I’m a home-body. While travel is nice, I’ve done plenty already in my life. I’d rather sit and read whatever I wanted, on my laptop or from library books or other sources of written material. I don’t like making things directly or handling inventory. What if “location independent” meant “enough of that other stuff, I’m staying home”? What’s the most extremely polar opposite of the “digital nomad”?

The answer was quite literally under my pillow-propped feet: the couch-based business.

The benefits are immense. Low overhead, congenial surroundings, comfortable environment, favorite music and food and drink are on hand, visual surroundings easily controlled and tweaked. You don’t even have to change out of pajamas to commute!

Of course, since there’s no coworkers present, you have to make do with aforementioned music, plus an iron grip on your own time. Those gym trips might be during daytime lulls, but the work still needs to happen.

For me, the main drawback is that I have others in the household. My wife and children do not have the self-control necessary to leave me alone when I need to be working, despite my best efforts to the contrary. To really pull this off, I need to really wreck my sleep schedule for long enough to get to a low-hour steady state. Otherwise the interruptions will (again) drive me to distraction and despair.

Sadly, this would run right up against the main reason I went with a long sabbatical and am aiming for Financial Independence: having enough sleep and enough flexible time that I can catch whatever balls my wife drops, when she drops them, without worrying about dropping my own goals to do so.

I’ll continue to press onward to find possible couch-based businesses to shoe-horn into my day. Perhaps I let go of the idea of “full-time money equivalent” and just go part-time for whatever I can pull in. Perhaps I gather a web-cam and microphone and start recording “let’s play” videos of strategy games.

Meantime, you can brainstorm alongside me. If you were restricted to only earning money while your butt is firmly planted on your best couch, what would you explore?

On (not) comparing FI nest-eggs

Part and parcel of Financial Independence is that you live a fulfilling life after transitioning to FI. Each of us has our own different sets of circumstances which we find fulfilling, with varying costs depending on quality, location, competition for resources, and the like. And the chosen cost and passive income mechanism together set the target Number.

News flash from Captain Obvious: my Number’s not the same as your Number.

So why the impulse to compare?

Once we get past the “mine’s bigger” and other “one up” status games, I think it comes down to looking for folks targeting similar nest-eggs and horizons. Larger Numbers and longer horizons call for different strategies and decisions than smaller and shorter.

Most of us use a varying mix of frugality and income increases to reach our nest-eggs, like Pete Adeney (Mister Money Mustache) and Paula Pant (Afford Anything). Very low expenses meant that Jacob (of Early Retirement Extreme fame) and Joe Dominguez and Vicki Robin (authors of “Your Money or Your Life”) could rely almost wholly on frugality to meet their low nest-egg targets. By contrast, high targets brought Loral Langemeier (“Millionaire Maker” series), Robert Kiyusaki (of “Rich Dad” notoriety), Michael Masterson (“Automatic Wealth”), and Adrian Cartwright (over at the 7million7years blog) to focus nearly exclusively on raising income to make progress.

Adrian Cartwright’s example seems fitting here. After much soul-searching, he set his annual expense level at 250k AUD. Less would honestly leave him unfulfilled. His higher expense level required serious reinvestment into his businesses, forays into real estate, and extraordinary hustle to reach his five-million-dollars-invested Number. He found frugality necessary, but still an after-thought to bringing in the high volume of income.

The uninitiated will spit-take here

Many potential FIers see such an elevated number, and blanch or even balk. They can’t imagine building up that sort of nest-egg. And most of them are right. They won’t need to, since the passive income off a smaller nest-egg gets them to FI.

Asking about the Numbers peers target helps me find folks who will likely use strategies I might use on my own FI journey. I can learn quite a bit from someone with a very different target and expected path. Reading Adrian’s and Paula’s blogs, for instance, give me insights into real estate that suggest it’s not how I want to bring my household to FI. Comments on bicycle commuting on the Frugalwoods blog reinforce my aim to live close to work. Seeing how Justin over at RootOfGood blog handles family vacations helps me choose potential destinations and activities to entice my wife as well as my daughters.

So if you meet someone gunning for FI, sure, compare numbers. More importantly, compare strategies, assumptions, self-imposed limits, and what you value. You might find an unexpected nugget of insight to incorporate into your plans. Maybe you’ll shave off some unfulfilling expenses and shorten your journey.

2016-04 active income and expenses

And now for the obligatory “new blogger flailing around”-style monthly summary of income and expense. This time around, it’s April and its various happenings.

Active Income

We continue as a one-active-income household, with my wife’s paychecks providing the bulk of the influx. My several months as the “stay at home parent” has been much shorter than my wife’s several years. I’m glad I had the chance at it. Still no contract or temporary job, so I expect to start looking maybe June or so. (You can feel the enthusiasm, I can tell. 🙂 )

whose take-home April 2015 average
Spouse W2 7154.91 6054.56
Self biz 0.00 n/m

This is a three-paycheck month for my wife, boosted further by a slight out-of-cycle raise. I’m still nursing the six-month sabbatical fund through its eleventh month. 😀

Hobby time will go to health (gym and meditation) and this blog.  I intend that all non-health hobby expenses will channel through my existing LLC. They won’t show up on household monthly reports.


I’ve developed these categories for the household’s expenses over the past several years. These are actual numbers; we keep no budget. Instead of “miscellaneous”, we have some discretionary categories.

We reside in a low-upper cost-of-living suburb in the US, supporting two pre-college children (one in residence, one out) and a second household with my mother-in-law and niece. We own two cars and our primary residence. Our only non-revolving debt is a home-equity line-of-credit, using 20% of most recent property-tax valuation for a slumbering side business.

Category April 2015 average
Auto 351.05 345.90
Clothing 618.57 117.34
Contributions 0 211.02
Dining 448.19 126.49
Durables 0 286.47
Education 491.49 705.08
Entertainment 0 340.59
Fees 110.00 -23.58
Food 745.30 639.79
Gifting 73.93 74.17
Housing 0 546.10
Personal Care 738.67 526.12
Postage and Shipping 12.90 2.92
Property Tax 0 390.94
Supplies 139.56 174.44
Utilities 502.26 464.92
Spouse discretionary 252.37 585.59
Second households 1379.58 2285.61
Self discretionary 2240.57 85.33

Most of these categories are self-explanatory. Several have subcategories under them, which roll up and are not visible here. For instance, “education” has separate subcategories for each child, “durables” subsumes “computers” and “furnishings”, and insurances subcategories appear where you’d expect.

The last three expense lines here are pure discretionary. Older child’s random expenses fall under ‘Second Households’ if not better fit elsewhere, as she is on full scholarship (HALLELUJAH!). My mother-in-law has cared for our niece in another state the past few years, in a rental unit we (my wife really) cover. This of course has drastically slowed our FI/RE progress.

April totals $8104.44, with $4231.92 non-discretionary and $3872.52 discretionary. Average month for 2015 is $7885.58, with $4929.05 non-discretionary and $2956.53 discretionary.


So how’d the household do this month? $7154.91 active income minus $8104.44 expenses means I drew $949.53 from the sinking fund I’d set aside for the sabbatical. As in previous months, the secondary households (barely) force us into the red.  The sinking fund is still far from sunk, so Sabbaticalia continues! 😀

Lots of funny bumps in expenses this month. I booked three months’ personal trainer time in one go, so my discretionary will return to its usual near-zero level next month.  My wife’s discretionary is unusually low, I think thanks to a missing credit-card statement.  The abnormal “clothing” amount is inflated by returns to be recognized in May.  “Dining” is high thanks to dinners for my fiftieth birthday and the last of the student lunches for my daughter’s school year. “Fees” is the annual Costco (discount warehouse club) membership renewals.

FI Projection

For purposes of projecting FI/RE dates, I assume certain of our non-discretionary expenses will halve as our children launch and we downsize our primary residence. Totalling our “retirement monthly expenses” (RME) gives $2532.10 as the floor for our required FI income. This in turn sets how much municipal bond income we need, and thus how much in bond face value.

I’ve set two budgets of discretionary expenses given our current discretionary spending. My wife and I will thus each have a “retirement monthly allowance” (RMA), $450 for me, $500 for her. This sets the target of dividends from stock (for me) and of draw-down from a balanced mutual fund (for her).

Our tax-deferred accounts, plus equity released on home sale, buffer us against inflation and minor lifestyle upticks outrunning these two portfolios. We both have (US) Social Security insuring against outliving our money. I spare you the page-long spreadsheet (with decade-old hair) that calculates my FI date as if we were to simply coast in neutral starting now.

And the coast-in-neutral projection is: eight more years to FI!

Hah!  Gained a year by recognizing we’d need slightly smaller discretionary amounts each month.  Should we decide to raise them again, it’ll be contrary to our observed trends, but perfectly doable.

Eight years remains longer than I’d like. (First world problem, yes?) The household still faces eight person-years of college expenses, and other opportunities for my wife to derail progress. Past experience suggests such goal-keeping will keep me very occupied, grrr …. That, FI’ers, is the price to pay for an apathetic partner!

Random Closing Thoughts

The main satellite household merges back during summer.  This should reduce overall expenses slightly, with no change to FI/RE projections.  We might take guardianship of my niece, or even adopt her.  That would delay the “empty nest” by a year, and add an extra undergraduate education to fund in the coming years.

The incorrigible optimist in me has finally given up. There’s too much spousal interference. Any side-hustle in the LLC must operate from outside the house. Past work-from-home efforts have been shot down hard: I’ve lost two previous attempts at early retirement, at opportunity cost in mid-six-figures when I stopped estimating a decade ago. Thinking about the situation no longer leads to a dark place, which is progress of a sort.  (Just not the progress I wanted!)

After twenty years of tracking expenses, I’m pretty clear on expense trends before we transition to FI.  At worst, we coast to standard retirement age, when we’ll wind down businesses and tap retirement accounts and government-provided social benefits.  (FI success, RE fail — I’m okay with that.)

FI/RE for new adults

This from a different reddit response.

A new reddit user writes:

I’ve just turned 18, and since discovering r/financialindependence I’m a weird mix of impressed and overwhelmed.

I’m graduating high school and going to college and I know that I won’t be happy in life unless I’m financially comfortable.

I also feel incredibly disenfranchised. All of this FIRE stuff is a lot to take in. Aside from the sidebar, where do I start? Is there a book I should start on, and what are your best tips for someone like me?


Yes, it’s a lot to take in, because of the so many ways you can successfully reach Financial Independence. That said, most share some common themes. Start with those, and you’ll find much that’s out there is simply some specific expression.

This list is by no means “canonical” or complete, just my take on core principles I believe most FI/RE folks understand and use consistently.

  • Spend less than you earn; invest the rest wisely.
  • Keep as much of what comes to you as you practically can.
  • Little is certain, but past history can provide sufficient data for confidence.
  • FI, like all things financial, are merely means to an end: living your life.
  • It always depends, on where you are and what you want.
  • Like your life, FI is long-term, in build-up and maintenance.

Spend less than you earn; invest the rest wisely.

You must have excess money to make progress. Debts will accumulate if left alone. Capital will deplete if not cared for and added to. You will give up if you choose a style of investing which fits you poorly.

Track your income and expenses, so you know and can control what’s flowing in and out.  Keep your expenses sensibly low.

Track your assets and liabilities, so you know what your resources and obstacles are.  Make sure each has its purpose in your life, and redeploy when a purpose changes.

Keep as much of what comes to you as you practically can.

Many fiscal drags exist. Some are inevitable (like taxes) while some can be varied (like mutual fund fees). You can often change how much you lose to those drags by careful attention to how you invest or otherwise deal with money.

Little is certain, but past history can provide sufficient data for confidence.

We cannot predict the future. We can project given past experience, and add some extra buffers to help cushion unexpected events.

For instance, the “Trinity study” looked at historical performance of different US portfolios serving a traditional retirement of 30 years. This gave the “4% safe withdrawal rate” rule-of-thumb for US 30-year portfolios, and the mathematically equivalent “25x yearly expenses as your nest-egg” and “300x monthly expenses as your nest-egg”.

Other studies extended its observations, leading up to a number of rough guidelines for sizing your investment nest-egg. Early retirees with US portfolios with 45-year horizons would initially consider a 3.5% withdrawal rate. US folks retiring really early have 3% withdrawal rate, with at least 60% stocks and 10% bonds, to use in the first-draft of their FI plan.

It’s not just impersonal history to consider. Also relevant are your own history of expenses, what you find fulfilling, your investment experience, and what you expect or want to make room for. Life continues, and you adjust your plans to reflect what you learn.

FI, like all things financial, are merely means to an end: living your life.

Keep your fulfillment enjoyably high. Misery isn’t why we’re working towards Financial Independence. You need to be as kind to “present you” as you are to “future you”.

It always depends, on where you are and what you want.

Location affects what’s possible. For instance, US folks have access to certain tax strategies which Australians do not.

Just as certainly, what fulfills you will cost what it will cost, and it will look differently than what fulfills someone else. Traveling the globe will demand a different flow of cash than learning to play bagpipes at home.

Like your life, FI is long-term, in build-up and maintenance.

There’s always something more which you could learn. Focus on what you can control. Learn what most affects your current situation, and set other things aside for now. Take things one step at a time, so you can easily back out of mis-steps and decisions which turn out to be ineffective for you.


The sidebar’s best books and blogs are great places to start. So much is accessible.  Ease into it.

Happiness won’t wait

Steve over at recently posted about when he started on the FI/RE path, “The day I realized that my life was crap, Part 2“.

He stood in a garage full of stuff, unfulfilled, and finally it sank in. “You can’t buy happiness; okay, you can’t buy everlasting happiness.” He switched his goal to early retirement, to get clear of a crap job. Things progressed, yet he stayed unhappy. A second realization came, that he needed to drop “once I retire early I’ll be happy” with a differently-phrased goal of “freedom, happiness, options”.

I hit a similar cascade some years back, and came away with an additional realization.

Happiness won’t wait; it comes first.

No goal matters if it doesn’t support my happiness. Even more brutally, I don’t make serious progress unless I’m at least somewhat happy along the way. Soul-sucking jobs provide money, yes, but so do ‘meh’ jobs which were soul-sucking until I started taking walks during my breaks to feel the sunshine and weather (which makes me happy).

I consider Steve’s three-part goal to be all aspects of one thing: being ready, willing, and able to choose for happiness. It doesn’t have to be big, sudden, or extraordinary.  Small choices for happiness come up much more often in my life.

I’m far enough along towards FI that “happiness” is a prime criterion for evaluating potential workplaces, activities, and purchases. Perhaps “joy” better describes its durability and depth, contrasted with the flashier (and flash-in-pan) nature of “pleasure”.