In your journeys to FI, do many of you put in more hours at work than the average person would find reasonable?
Do you sometimes question why you do that?
Personally, work has been extremely challenging for probably fifteen years now, though rewarding in its own ways and now it’s getting even harder.
Why, you might ask? Because I’m taking on increased responsibilities, title and with it comes high expectations and higher compensation.
Is it worth it? I’ve calculated it should allow me to save and invest enough that within seven years I can retire and have sufficient capital that would be the equivalent to winning a small lottery.
If I told you that you could bust your ass for seven years and retire, for life, with the equivalent of a lottery win, would you do it? What sacrifices would you make?
I ask this because I’m often challenged by certain conversations with some family members. They see how I work and the impact the stress and the hours have on me and they tell me I’m crazy. Separately, we talk and I may ask “what $ would you need to win in the lottery to retire and not work again or just do something you love?” First, most of them haven’t actually considered it and don’t necessarily have an idea how to compute it. when we work through it together they come up somewhere between $2 million to $5 million, depending on their math. The process causes me to laugh to myself, because while they’re telling me it isn’t worth it, they’re saying that the number I will get to by doing it is the number they need to retire and live their dreams, though I don’t share that aspect.
Wait, I can bust my ass incredibly for seven more years until at the age of 44, I can live the life of my dreams and it isn’t worth it?
Let’s change the question: What if it is worth it? what if you can do it and it simply requires hard work and sacrifice and in under a decade you can retire and live the life of your dreams? Given this paradigm, I ask you “What would you be willing to do?”
The crazy part, all else equal and God willing, we will achieve the numbers of our dreams and we are horrible frugalers. I’m spending 5x, or more, of the number I see other frugalers spending and we are still on track.
We are going to cut our expenses materially this year and look to, ideally, decrease them 15% per year and take our savings rate up to 55%+. I’d like to see the number approach 75% and while that seems crazy, in years four to eight in my timeline, our combined after-tax income should be ~ $300,000+ so 25% spend rate is still $75,000 annually or ~ 3x MMMs annual goal! It’s also the number I’ve seen him post is the salary that makes you happiest and would be a great 4% goal.
If I wanted a salary of $75,000 after tax, I’d need to earn ~ $135,000 before tax (I will do the actual math for my projections). At 4%, that would be $3,375,000 I would need in investments. Unfortunately, my house won’t be able to contribute to that if I want to be mortgage free and it should be worth ~ $1,450,000 by the time we retire so I will need a net worth of $4,825,000. Hey, the family members shaky math matches my roughly more thought out math. That said, both Mrs Frugaler and I will still do some work, we will just enjoy it more so we could likely cut the $3,375,000 in half and say we need between $3,137,500 and $4,825,000 and I project we will be there in 2022 | 2023.
What’s your number? What are you willing to do to get it? Have you thought about it? Do you track it? Do you have a plan to get it?