Last I checked, the median gross household earnings were close to $60,000 a year, so this number looks pretty good.I used a take home pay of $50,000 a year to calculate all scenarios.Here’s how the math works (skip if you’re not nerdy enough to care): I re-created his table and reproduced it below. You’re starting from a net worth of zero.You would use the 4% rule to determine your retirement spending, with some flexibility for recessions.That you could earn 5% adjusted for inflation on your investments.To estimate how many years it would take to reach retirement at various savings rates, Mr.
As a spoiler, I think the primary observation that he left on the table is that even though cutting spending is twice as powerful, there comes a point where increasing income is the best way to reach your goals. We’re going to break it all down below in detail, because there are still some insights to be gleaned. His math does make some assumptions, but they are reasonable. I’ve ran the numbers myself and re-created the table that is the centerpiece of his post, and the numbers check out. Money Mustache created a chart showing how long it would take to retire at various savings rates (e.g. So spending less increases the amount you can invest towards retirement and decreases the size of the portfolio you need to retire. This is because if you use the 4% rule (which he’s covered and I’ve covered), you can retire when your portfolio is 25x your annual spending. Money Mustache points out that decreasing your spending is doubly powerful. Since your savings rate is a percentage of your take-home pay, you can increase it in two different ways:īoth of these are powerful, but Mr. So you can think of dividing your take home pay into two categories: Your savings rate is just the percent of your take-home pay that you invest towards becoming financially independent. The post argues that when it comes to the question of how long it will take you to retire, there’s only one factor that really matters: Your savings rate. And there’s also the fact that it has an A++ headline.īut my question is simple: Does it hold up? Let’s explore it deeper. It covers a topic that is important, and-for most people-novel. The big takeaway from today’s episode (intentionality and optimizing without sacrifice).One of the most famous posts in the personal finance blogosphere is “ The Shockingly Simple Math Behind Early Retirement” by Mr.
How to find out the price history of your favorite products and turn buying into a fun game How Brad spent $150 instead of $5,000 on a vacation using reward points Saving on mobile phone plans and controlling what you do on data įinding tiny sacrifices that work for you
How to get free eBooks from the public library
Hacks beyond saving money from your income The 4% rule isn't perfect, this is Chris’s issue with it How do you figure out how much you need to save to achieve financial independence (4% rule of thumb) If you know you want to work forever, use this advice įiguring out how much you are saving on a sheet of paper v. Įven Brad makes mistakes where he can be more aware. Step one to financial independence is finding out how much your life costs. Proof that Brad is not living in deprivation ĭo you have to save 90% of your income? ĭoes saving mean you have to spend 30 hours a month tinkering with your finances? The greatest hack is this mindset shift: what do you value more? The choices Brad made that set him up well for financial independence ĭoes financial independence mean you have to give up everything while you save? Is financial independence something anyone can achieve? (it’s a simple equation) The ultimate definition of financial independence
What is financial independence (the one hack to rule them all)? Who is Brad Barrett the financial independence expert? Track price history and set price alerts on your favorite products: Camel Camel Camel Hotels mentioned: Disney Swan Hotel | Fairmont Bermuda Hotelīook a personal trip through rewards with: Flight Fox Learn how to travel the world for pennies: Travel Miles 101 Money MustacheĪutomate your savings strategy: WealthfrontĬheaper mobile phone plans: Republic Wireless | Mint Mobile The shockingly simple math behind early retirement article: Mr. He also runs Travel Miles 101 and Richmond Savers.ĬhooseFI: Podcast | Instagram | Local groups Brad became financially independent and quit his job at 35 years old, without ever earning a six-figure salary. #2: Financial independence (FI) expert Brad Barrett joins Chris to discuss how you can achieve FI no matter how much you make, including how much money you need to hit FI, savings hacks you can use along the way, and the power of intentionality.īrad Barrett is the co-host of ChooseFI, the top podcast on financial independence with more than one million monthly listeners.