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It occurred to me last week that I have been looking at this whole FI thing the wrong way. Building your wealth is a long process and it takes time…1,979 more days in my case but who’s counting?! In an effort to not feel overwhelmed, I decided to flip the script. What if I started looking at FI from what I have already saved? What if I start looking at it with an attitude of abundance and not destitute (a tad dramatic but I love the striking opposition it induces 😉 ).
The basic formula for FI is 25 x yearly expenses. Whatever that number equates to is considered safe to use a 4% rate of withdrawal. If all these numbers are true, we can instead flip it around to calculate how much I would receive each month if I quit working today based on what I have already saved! Here’s a semi-random example:
Bianca has $333,000 in assets. Divide that number by 25 and you’ll get $13320 per year which is equal to $1110 per month.
$1110 per month. That is how much all my years of work combined have afforded me to live. For reference, I have been working and earning a W2 since 1993 when I was 14. That’s 24 years of working for the man and all those years of labor have afforded me 1110 dollars per month of FREEDOM. Isn’t that incredible?! Not from a high or low standpoint but just that it is actually calculable?! Isn’t it strange to compare your future life’s enjoyment based on the number of hours you worked to earn such jubilee? It’s hard to wrap my brain around!
So the question is, forgetting all tax implications, could you live off $1110 per month? If forced to do so, I’m fairly certain my answer would be yes. I’ve crafted my life in such a way that I have few responsibilities which result in my cost of living being lower than most. Granted, my studio is paid for and I would likely have to stay there, I’d have to remove all travel from my agenda, sell my car in favor of my bike, eat a shit ton of beans and rice (which I do anyway), and never get sick. Pretty risky with some of those variables but I could probably make it work, and many people do.*
For some reason, looking at the FI equation in reverse has been a huge aha moment. Calculating the numbers with what I currently have and not this mystical number I am aiming for makes me feel more…I don’t know, at ease. Like, not so desperate to work my ass off and save every last dime. I could retire now…kinda, but I am choosing not to.
You see, I don’t want to frugal myself into a corner. As much of a homebody as I am, I still love to travel and explore new lands and cultures. As much of a home cook as I am, I still love to try new restaurants on occasion which leads to more delightful copy cat meals at home. As sober as I want to pretend to be, I still love having a glass of wine or two with a good meal. All that fluffy goodness in my budget would be stripped from my relatively poor outstretched hands! So I won’t be leaving work anytime soon. I will, however, be cutting back on my self-imposed strict schedule.
Last years challenge of working 100 trips a month was super lucrative but, as much as I love my job, sometime around October I started to dread the beginning of each month when the hourly tally was at 0. All I could picture is those hundred flight hours I would have to complete to hit my monthly goal, the nights away from Bubs and my guy, and all the hours in between that I wasn’t getting paid sitting in random hotel rooms away from my life. While there are plenty of people who work more hours and more overnights than I, the point is not to compare but to know what you are capable of without burning out. I have 5.4 more years to go…I don’t want dread to follow me every step of the way and the good news is that I don’t have to. This year I am working a bit less and have loosened the reins in my budget to make room for more community and travel related adventures. If you are feeling that same burnout and have the opportunity to work a few hours less per week, I give you my full blessing. What is the point of reaching FI if you are completely devoid of life when you get there??
The worker bee in me looks at this equation with another dimension… Just because $1110 is what my current savings would get me, that doesn’t mean I couldn’t get a little part-time gig to add to my monthly income and expand my social circle. You need to do something to keep busy in retirement, right?? I could start crafting and selling jewelry at street fairs again or pick up some shifts at a restaurant…I have always been fond of the service industry and the free food that comes with it… And there it is, I put myself right back into the workforce, but this time on my own terms. It’s hard to break a habit you have been contributing to for so many years! 😉
** So where are you at on your journey? Has this exercise helped? Have you reached a livable wage or are you still working in the red (been there!)? Let’s chat! **
Until next time…
*SUPER EXERCISE…Did you know the current poverty level in the US for a single person household is $12,060? Have you ever had to live on that little? If you are curious, check out this site called SPENT to give it a shot. There is a little challenge that will walk you through the real-life issues of our unemployed or underemployed living on the bare bones budget of $1000 a month. Pretty eye-opening stuff and I am so grateful to not be in that position.*