What's Your Number?

Last week I had an interesting discussion with my good friend Jake Liddell about the FIRE (Financial Independence, Retire Early) movement, which is a lifestyle movement with the goal of gaining financial independence and retiring early.

I had not stumbled upon it before and thought it was an interesting concept to share.

As a simple explanation, those seeking to attain FIRE intentionally maximize their savings rate by finding ways to increase income and or decrease expenses.

The objective is to accumulate assets until the resulting passive income provides enough money to cover your target living expenses.

For example, you may take 5% of your assets as the yield you can achieve without tucking into the actual balance you have saved. 

The 5% is easily achieved by putting your money into a diverse investment portfolio - ideally having ownership in all asset classes and effectively you buy ‘a small piece of the world’ and back that global trends are always up on average (there are a ton of ‘done for you’ services who handle this).

The reason for the above is it is super safe and not all eggs in one basket.

The nice thing about reaching this true level of financial independence is that paid work becomes optional, allowing for retirement from traditional work decades earlier than the standard retirement age.

It also never goes away and so can be an amazing income stream to hand down the generations in the form of a trust[RW1] (or other wrapper).

So, the big question is…

What’s your number and what are you doing to get there?

For example, if you wanted to have ￡10,000 per month as an income figure that would be calculated as 10,000 x 12 months = ￡120,000 pa

￡120,000 / 5 (for the interest rate)

Multiply it by 100 to work out the percentage = 2,400,000

So, you would need ￡2.4 Million under management.

For me I am working toward a number of ￡3.6 Million to give me ￡15k per month.

So, what’s your number and what are you doing to get there?