This is my master plan for financial independence, the blueprint to freedom. In March 2019, I started my journey to financial independence and early retirement (FIRE) from zero. As a single person on an average wage, this means I have a long way ahead of me.
My aim is to be financially independent by age 40 (by November 2028). Financially independent means I can live from the returns of my investments and do not need to work unless I want to.
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My master plan for financial independence
How to calculate your FIRE number
The most popular way to calculate the amount of money needed to achieve FIRE (your FIRE number) is the 4% rule. Based on the results of the Trinity Study, it is safe to withdraw 4% per year from an investment portfolio without ever depleting it. Hence, there are two ways to calculate how much money you need in your portfolio:
- Divide annual expenses by 0.04
- Multiply annual expenses by 25
Annual expenses=how much you spend in a year
However, due to limitations of the Trinity Study, many FIRE aspirants use lower safe withdrawal rates, ranging between 3-4%.
Alternatively, you can use a FIRE calculator. This will give you a more individualised number as you can adjust your withdrawal rate, interest gained, etc. There are several different calculators available:
If you are not interested in reaching FIRE, you can work out the amount of savings you should have at your age and use this as your target.
My FIRE Number
My current estimated annual expenses are about £13,200. This would give me a FIRE number of £325,000 (using the above formulas), meaning I would have £1,100 to spend after retirement. Having £1,100 per month does not sound like much but
- It is an amount I can easily live on
- I won’t have any work-related expenses
- I still plan to make some money while retired.
Since this is my life I am planning, I will use a withdrawal rate of 3.8% rather than 4%. This is because the Trinity Study only looked at a 30-year horizon whereas I do not know how long I will live. This rate gives me a FIRE number of £347,368.
Hence, I will aim to save £350,000 by November 2028. Retirement will be my birthday present for my 40th birthday.
Progress to FIRE
In the sidebar, you can see my current status. The percentage is the amount I have saved in relation to my FIRE number, £350,000.
Hopefully, at the time you are reading this, the percentage will have increased.
Aiming for £350,000, I can calculate the amount I need to save each year. Note that I have defined year as the period from January to December, even though I started in March of Year 1 and will finish in November of Year 10.
The table below is my theoretical savings plan. It is only meant to be a guide as
- My circumstances will likely change e.g. redundancy, move, having children, etc.
- There may be periods of economic recess/higher growth
- I may want to change my goal.
|Year 1 (2019)||£20,375||£22,769|
|Year 2 (2020)||£23,662||£46,431|
|Year 3 (2021)||£26,594||£73,025|
|Year 4 (2022)||£29,762||£102,787|
|Year 5 (2023)||£32,143||£134,930|
|Year 6 (2024)||£35,754||£170,684|
|Year 7 (2025)||£38,615||£209,299|
|Year 8 (2026)||£42,744||£252,043|
|Year 9 (2027)||£47,203||£299,246|
|Year 10 (2028)||£50,772||£350,018|
Values for years 2-10 are projections.
You can follow my journey by reading my savings reports which I publish at the end of every month.
Why does the amount of savings increase?
You may have noticed that I am planning to save more and more every year. This is possible due to
- Earning interest and compound interest (interest on interest)
- My salary hopefully increasing
- Being able to earn more from passive income sources
- Establishing new side hustles.
The main ingredient of these is compound interest. This means my savings will grow exponentially rather than linear. In basic terms, the more money I have, the more interest I will receive.
My plan for financial independence – goals
Despite elaborating on my financial plans in great detail, staying healthy will always be my number one priority. Number two is being happy and living a satisfying life. In the sad case that I should pass away before I can reach financial independence, I will die happily and without regret.
Monthly FIRE goals
- Achieve a savings rate of over 60%
- Stick to the budget
yearly FIRE goals
- Increase income by 15% every year
- Add one new income stream every year
- Max out ISA allowance
These are more a loose list of ideas at the moment and will get finalised once I am closer to FIRE.
- Adopt a child
- Go to ASDA and clean the car park
- Write a novel
- Continue blogging
- Try different jobs e.g. be a cleaner or a waitress
- Pick up litter regularly
Every month, I complete a savings report detailing my income, expenses, and savings. Below is a list of all past reports:
2019 savings reports
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