When I first started this blog and began writing about my progress to financial independence (FI), I put a lot of thought into my goal net worth amount. That goal amount combined with my current savings rate, monthly expenses, and estimated investment returns are what I’ve been using to track my progress to FI each month. The problem is that over the past 14 months, since I started documenting my progress, my ideas about what financial independence is and what I plan to do when I get there have changed. Initially, I took my current yearly expenses, added a 40% buffer due to uncertainty in the future (likely kids at some point), and then multiplied that amount by 25 (based on the 4% rule) to figure out the amount that would be my target.
After reevaluating, I believe the 40% buffer is very conservative and probably not realistic. My initial reasoning was that my yearly expenses will inevitably increase once I finish traveling and settle into more permanent housing and will also increase once I have children. While I still believe that my expenses will increase, I have decided that a 25% buffer is probably more realistic especially when considering the fact that I will likely still have some sort of income after financial independence, although I’m still not sure what I plan to do exactly. In addition, I plan to spend at least a portion of each year living outside of the United States (at least in the beginning) in lower cost of living areas such as southeast Asia. Traveling and living abroad should be a great way to broaden my worldview while simultaneously decreasing my expenses.
I have now adjusted my spreadsheet to reflect the decrease in my spending cushion from 40% down to 25% and the result is pretty cool. All of a sudden my FI date is about 8 months closer, and I’m almost exactly halfway there after only working for two years. Seeing this result made me reconsider my goal. When I started this blog my plan was to reach financial independence with only a five year working career which would have been right around my 32nd birthday. After steadily saving more and more each month over the past year, the estimated date got closer, and now after this adjustment and a change to my estimated monthly savings last month, I have a new target in mind.
My new goal is to reach financial independence at the age of 30 after only a 4 year full time working career. I define financial independence as my current yearly expenses plus a 25% buffer being 4% or less of my total net worth. Although this goal may seem lofty, I am 100% certain that I can achieve it with higher paying travel jobs, working as much overtime as possible, working PRN jobs when available, and continuing to hustle with bank account and credit card sign up bonuses. I also plan to begin seeking out opportunities to make extra money by writing posts for other blogs and continue to earn referral bonuses for matching other travel therapists with a couple of my favorite and best recruiters.
It always feels great to put my goals out there for you guys to hold me accountable and follow along. The blog has grown a lot lately, and I sincerely appreciate everyone that reads my posts. I want to encourage everyone reading this to create your own financial goals and share them publicly for critique and to create accountability. I welcome any comments or questions in the comments section below! What are your goals for the next two years??
6 thoughts on “Updating Financial Assumptions and Goals”
Interesting post. I think the 25X rule based on the inverse of the 4% rule is a great starting point for determining when you are FI, however it is not at all that simple. For one thing with a long retirement and with valuations and interest rates horrible for anyone starting retirement at this point if planning to actually follow a 4% WD rate w/ inflation adjustments as traditionally described I think it is highly likely this fails. On the flip side, as you point out someone with the interest to FIRE is highly unlikely to be able to sit around and not earn any additional income, and even a little bit of income (say $10k/year) combined with a low cost lifestyle you drastically improve your odds of success, meaning waiting until you have 25X may actually be too conservative. It really depends on what you want and how flexible you want to be.
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Good points. I agree completely. Anyone with a long retirement planned would be crazy to rely on withdrawing 4% a year as I imagine the failure rate is probably 50%+ especially with such high asset valuations. That’s the awesome thing about our job though, PRN work of only 5 hours a week or so would more than cover my current expenses which is pretty cool. I definitely wouldn’t mind working 1 day per week to supplement withdrawals if needed even if I didn’t earn any income from other sources. I wish a big drop in asset valuations would happen soon so I have time to take advantage of the low prices prior to FI!
As a traveling therapist I assume working in different states can be tricky during tax season. Do you file your own taxes or hire someone?
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Hey, mark. I was a little nervous about the tax situation at first and definitely considering hiring someone. I did a lot of reading on it and found that it really isn’t that difficult. My federal taxes are unaffected by working in different states but I do have to file a separate state return for each state I work in during the year. I file as a resident of my home state and then a non-resident of all the other states I worked in throughout the year. It probably took me a couple of hours to figure everything out and doing the extra state returns probably only adds an extra 30 minutes to the process each year. I may still end up hiring someone once my financial situation gets more complicated though (investing in small business, personal loans, and rental properties).
I am in the same situation. I don’t have any investment properties but I will make contributions to different retirement accounts. Does turbotax have the capabilities to handle incomes from different states or do you recommend another e-file tax software?
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I used turbo tax this past year and it worked very well. It was also free due to my net income being below a threshold (can’t remember how much exactly) from traveling.