We recently read FI180’s Milestone of FI post and also listened to the awesome podcast interview from ChooseFI. We really enjoyed how Joel from FI180 laid out these tangible checkpoints to help gauge where we are in our journey. It caused us to take a breath and reflect on where we are at, how far we have come, but more importantly, to acknowledge/celebrate our accomplishments thus far.
If you haven’t read Joel’s post or the podcast, we encourage you to go check it out. In short, the milestones of FI are:
- FU Money: 2-3 yr (or depending on your comfortable level) of expenses saved up to leave your employer
- Personal Capital (PC) Call: ~$100k where you get a call from PC to discuss how they can manage your money
- Half FI: halfway through saving for your FI number
- Lean FI: enough savings to retire if you eliminate discretionary spending
- Flex FI: roughly enough for a 5% withdrawal rate but will require flexibility with expenses depending on market performance
- FI: this is 25x of your expense or the savings needed to have a 4% safe withdrawal rate
- Fat FI: essentially as foolproof as you can get for FI where you have 30x your expenses saved.
My wife and I have only been on the FI journey for a little under 2 years. Prior to that, we just knew we had to be somewhat responsible with our money and have some savings. However, all that savings essentially went to our house down payment at the end of 2014. We got married in spring of 2015 so you can imagine our bank account was pretty much emptied. I had some 401k saved and about ~$15-20K in a brokerage account. You can read about my rookie mistakes here!One good thing about our wedding is that our family and friends tend to gift money. As a result, we ended up breaking close to even for our wedding (~$40k); weddings in LA can be pricey. At this time, I still had some student loans and the wedding gift money basically killed off that 6% interest rate loan. Essentially, we were starting out fresh as a married couple. We didn’t know anything about this FI community yet but wanted to at least recover our expenses and build a savings. June of 2015 is when our FI “clock” officially started since our only debt at that point was our mortgage.
Milestone #1: FU Money
Where are we now? After learning about these milestones, we realized that in a little less than 2 years we have passed milestones #1 and #2. With milestone #1, we started out trying to save about 6 months of living expenses. We made the assumption that we need about ~$4,500 (w/mortgage) per month after taxes. We were able to hit that in a few months with that DINK (Dual Income No Kids) life! Shortly after, we decidedly we should aim for 12 months… you know… just in case. Around this time (close to end of 2015) is when I started looking at investment approaches and learned about the FI community. I opened a Vanguard account and started an aggressive savings path. We lay out our asset allocations here. By the end of 2016, we had close to 2 years of monthly expenses saved in the brokerage account. FU money unlocked!
Milestone #2: Personal Capital Call
Regarding milestone #2: Personal Capital call, I didn’t think much about it but thought it was pretty funny after I learned of it as a milestone from the Choose FI podcast. We didn’t use Personal Capital until early 2017 and prior have only been using Mint to track expenses. I find Personal Capital easier to track net worth (minus property equity) but Mint cleaner to track monthly expenses. By the time we opened a Personal Capital account, we have passed that $100k milestone and now pursuing milestone #3: half FI. We’re trying to get our yearly expenses down to $45k and to date, have been keeping it pretty close. There’s still room to optimize our spending. Here’s how we are cutting costs. However, with the baby coming, we will have to reassess. Assuming $45k/yr, we’ll need about $560k for “half FI”. We got a little more than halfway to go if you factor in our whole portfolio. But we’re learning to celebrate the small victories along this path. It was pretty exciting to write this post and see how far we have come!