For those that do not remember, in my 4th article, I calculated our FI ("financial independence") numbers.
As a recap, I determined that if we had the following amount of passive income per month, we would officially be FI:
Financial Independence Number = $2,710
Current Average Spending Number = $7,747
Current Target Retirement Number = $5,332
Then, using the 4% rule as a baseline, I then determined to be able to reach those monthly numbers, we needed the following amount in our investment accounts:
Current Financial Independence Number (“FI Number”) = $813,000
Retirement Number Needed to Continue Current Lifestyle = $2,324,100
Desired Lifestyle Retirement Number = $1,599,600
Reread article 4 if you want to know how I determined the above numbers. Also, click on the below image if you want to know more about the 4% rule from Investopedia:
With this in mind, I decided to crunch some numbers and lay out two different scenarios. Oh, and as a reminder, my Seven-Year Time Challenge ends September 24, 2029, the day I turn 40 years old.
Scenario 1 - Earn More AND Go Into Extreme Saver Mode
Our total dollar amount in our tax-free, tax-deferred, and after-tax investment accounts total roughly $165,000 (over $100k is in our after-tax account).
With 6 and 1/2 years remaining in the time challenge, I am going to assume a modest 4% per year investment growth over that time period.
Using these assumptions, we would need to invest $6,743.37 per month over the next 6 and 1/2 years to reach our FI number.
With our expected gross income for 2023, that would put our savings rate at 67%!
It is possible for us to reach that number, but my wife and I do not want to pursue that lifestyle - yet.
Scenario 2 - Find Other Sources Of Passive Income To Lower FI Number
The current FI number is $813,000 to account for $2,710 of monthly passive income. But, it is possible to play around with these numbers to entertain a different possibility.
Let's say that we were able to find a way to generate $1,710 of monthly passive income from other sources, such as through our commercial rental property. This would change the above numbers drastically.
Again, using the 4% rule as a baseline, this means we would need $300,000 in our investment accounts to generate $1,000 of monthly passive income.
Using the same assumptions as above, we would need to save $978.63 per month over the next 6 and 1/2 years to reach that number. This actually sounds possible!
The Worse Case Scenario (barring death, divorce, or disability)
We fail to keep up with our roughly 30% savings rate, we fail to generate enough passive income to reach FI by 9/24/29, and we keep trying to reach our number at a later date.
Wait . . . WHAT?!?!? That's really the worst-case scenario?!?!?
As I said above, not including death, divorce, or disability, the worst-case scenario still leaves us in a far better financial situation.
Setting Aspirational Goals
The great thing about setting big, aspirational goals is that even if you do not reach them, you should have still created a better life for yourself.
I think I have tweeted a couple of times about how I am never insulted when someone calls me a dreamer.
Being called a dreamer should be seen as a badge of courage. Then, if you are crazy enough to not only dream big but to take measurable steps to achieve those dreams, you are becoming a force that will be increasingly harder to stop.
That is what I am constantly striving for.
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