Monday, August 23, 2021

Zero Days Out...Were We On Track for Financial Independence?

Zero Days Out...Were We On Track for Financial Independence?
I turned forty one a couple weeks ago, which was kind a bummer. I've never been a big fan of my birthday and this has only gotten worse with age. I'd like to stop commemorating it altogether, but I have these people who love me and reminding me is a way to show that love, which is great. It's also a bittersweet reminder that, yes, I have less time now than I did last year.

It doesn't feel like I have so little time, to be honest. I don't feel forty one. And I don't feel old. I feel like I did all through my twenties and thirties: I just feel good, and I feel like the same guy. Yes, I have kids now and, sure, my body isn't as taut. But I'm me.

So I feel young, even as I get old. I'm okay with the trade off. Though I wonder if I stopped counting all these years, maybe I'd feel even better.

Back when I was thirty two, I started writing with the goal of reaching financial independence, and retiring early, on the last day I was still forty. I stopped working back in February, so I guess I can check off the early retirement part. 

Did we actually reach financial independence?

Let's let the numbers do the talking, and start with the easiest scenario. Did we hit financial independence with the metric that I used back in 2012: the 4% Rule? Here's what the Mad Fientist's laboratory calculated:

Zero Days Out...Were We On Track for Financial Independence?
FI Progress at 4% SWR. Click for bigness.

A couple caveats for these charts:

  • Our spending for the past 12 months was $42,324. But that number is weird for a couple reasons.
  • One, we paid off the mortgage a couple years ago. Our spending would be in the neighborhood of $57,000 if we kept it around.
  • We also purchased two used cars in 2020 for a total of $20k or so (a post to come on those purchases), and gave our old Matrix to our niece for her first car. I didn't know how to include this "one time" (okay, two time) spending in the calculations while still having the spending & FI calculations make some sort of sense. So I omitted these "one offs" but still include the cost of registration, insurance, etc.
So with the original goal we set out for back in 2012, things are looking okay. But we're not huge fans of the 4% rule. What if we went down to 3.75%, maybe the most aggressive safe withdrawal rate we'd actually roll with in reality. How do we fare then?

Zero Days Out...Were We On Track for Financial Independence?
FI Progress at 3.75% SWR. Click for bigness.

Okay, not too shabby. $3,832 a month covers our expenses over the past year, with some room to spare. But 3.75% isn't quite as conservative a withdrawal rate as what we'd like.

Our latest plan called for a 3.5% SWR. Would we be able to swing that?

FI Progress at 3.5% SWR. Click for bigness.

With the smallest of margins between that purple and green lines, we seem to have made our goal. Parenthood has taught me to take wins wherever you can get them, so that's what I'm going to do here. We did it.

Very little of our financial independence journey has gone exactly to plan. We've paid off mortgages just to do cash out refi's and invest, then gone right back to debt payoff all over again. 

The original plans sometimes centered around not having kids; we ended up having one and then another for good measure. We thought rental properties would be the foundation of our FIRE plans: turns out we didn't like being landlords, sold the houses and got the kids college funds instead.

At first we decided both of us would stop working at the same time to spend time with the kids; for now, one of us will be working. (And with that twist on work plans, I should probably mention that we never planned to have ongoing encounters with the internet retirement police. But maybe we should have.)

While so little of our plans worked out like we thought it would, we got the big picture right. The midwesterner in me doesn't allow bragging or self-congratulations and it makes for terrible writing, but I'm going to do it anyway. 

We did the thing. There was a lot of luck and half of the time we didn't know what we were doing but, as always, better to be lucky than good.

*Photo is from Suman Chakrabarti at Flickr Creative Commons.

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  1. Congrats! Your midwestern roots are showing with your slice of humble pie (better to be lucky than good). I'm sure there was plenty of hard work to get you where your are today!

    1. Hi there, BLL. It's true! I recoiled when I wrote something positive about my accomplishment and felt I had to qualify it in some way, if only so I could show my face when I went back home.

      Yes, there probably was some hard work in there, too. :)

  2. Happy to read. Lots of thinking going on here on safety margins. A few years to go, let's see when we make the leap.

    1. That sounds like a good idea, lucilius. I wish we'd had more margin for safety when I left work, but it was kind of a gotta-leave-now situation. Still, if you can plan it out and have some wiggle room, that is surely a better way to go. Thanks for reading.

  3. Congrats! You made it!
    Ignore the retirement police; they are bored and need to be assholes to stay functioning otherwise they explode. ��

    1. Aw, thanks again, friend! I really appreciate that.

      I think I'll have to write a guide for the IRP. Maybe a FAQ? How many acronyms can I fit in one post?

  4. Happy belated birthday! I turned 41 a few months ago. I turned 40 during the pandemic and said that pandemic birthdays don't count so I'm still 39! My boys tell me I have some white hairs and that means I'm old =P
    Plans never work out how we originally thought but that's okay. You're doing great and have plenty of options. You guys will figure it out.