This spring my husband introduced me to the subreddit board for Financial Independence. Although it seems the majority of those who post are males in the tech field (my husband fits this category) I have started to read the posts regularly. Since it is much smaller than the Mr. Money Mustache forum it is much easier to manage. I get too overwhelmed sometimes trying to find topics of interest when I go to the MMM forum so Reddit has been my go to recently.
In addition to the regular Financial Independence subreddit there are also a couple more specific pages. There is a page for LeanFIRE which is for those who are trying to reach Financial Independence and Retirement (FI/RE) but with smaller budgets. These individuals are trying to make it happen with $40,000 or less in expenses. For many this means they might need only $1,000,000 in investments as a 4% withdrawal rate would generate enough income for these individuals. Although I wish we could get our expenses down to that level it is just not possible where we live. We live solidly in a medium COL area and our mortgage and property taxes alone are almost $18,000 per year. No, we don’t live in an extravagant house. Our home is a very modest duplex where the majority of this cost is covered by the rental income but still, it demonstrates that where we live is not cheap. So as much as I would love to be after a LeanFIRE lifestyle it is just not realistic for us.
On the other side of the coin is FatFire. This group is for those also pursuing financial independence but who are looking to have enough for a great lifestyle. They are OK working for a few more years to ensure that they a little more money to spend in retirement. Everyone’s number is slightly different but I have seen targets of $4,000,000 in assets which at a 4% withdrawal rate would generate $160,000 in income annually. Certainly cushy! And in some ways this sounds amazing but as it is well above our current spending this is not what we are striving for. Although it would mean we could dine out more often like we did in 2015 when we spending an average of $1,000 per month on food alone. Even if we were to cut this number in half with savings of $2,000,000 we would have $80,000 in income. Based on my estimates, which of course are very rough as it depend on market returns, we could reach this level in about 7 years. Personally, I am not willing to hold down a full time job for this long so FatFIRE is also likely not for us.
Instead my husband and I are going for what we call FitFIRE. We want enough padding so that we don’t feel constrained by our budget or have to fear every slight market downturn, but have just a little bit of padding just in case we want to do something fun. I also just love the term “fit” as I trying to live a healthy lifestyle and love being fit.
Our plan is to supplement our withdrawals with some part time work (mostly my husband’s business) and our rental income. Because of this it is not quite as easy as just taking our annual spending needs and multiplying this amount by 25 (this is the fast way to get the amount needed for a 4% safe withdrawal rate) to determine the magic number. Based on our current estimates (which could change based on health care) our rental income covers just over 40% of our expenses. Add on some part time work/business income and we don’t need to actually withdraw all that much from our accounts. But in order for us to feel comfortable and get us to the FitFIRE level, we are likely going to try to reach an amount in invested assets that could produce enough income to cover 75-80% of our expenses. This would give us enough of a buffer so that if/when we decide we no longer want to work my husband’s business or part time jobs we will still have enough to be completely financially independent.
My hope, based on our current estimates, is that we can reach this level by 2020. So for now we are flexing our muscles and saving our hard earned money. FitFIRE, here we come!