Financial independence ratio below normal
I just wanted a ballpark figure. Your number looks good.
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The net worth is still increasing. When you need a replacement vehicle for example. I guess you can just put in a bigger withdrawal 5 years out or something like that. Reply Link Dave June 25,am I am actually shooting for a hybrid between 1 and 2 and in reality, will have a mix of all three! I take my monthly expenses, subtract my passive income, multiply by 12 for my yearly expenses after income. I am creeping closer all the time, but definitely have a few years left to build my way there.
And of course, once I do hang em up, I will probably end up participating in work that produces income anyway, just because, as you said, doing nothing leads down a dark path. Reply Link Michelle June 21,am Financial freedom to bitcoin code means that the money I make, I choose where it goes in MY savings account and not to high interest rates or student loans. Yes work towards active and passive income.
Nobody wants to really retire from life. Maybe from a job they hate but not from work. The financial independence ratio below normal is to finding your lifes work that you enjoy pursuing. Think of all the wealthy people in this world that do not have to work but still choose to do so. They do so because they love it.
That is what all should strive for. Find a passion that wecan get paid for that provides active income while at the same time doing things to build your passive income.
- Thukral has over 25 years of experience in the financial services industry.
- But what does financial independence really mean?
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This post pretty sums up some of that philosophy. Thank you for the great information RB40! On the other hand most of us will incur considerable additional expenses over what we spend today to cover health insurance until we reach At some point I plan to start drawing mine down. Reply Link retirebyforty June 19, financial independence ratio below normal, pm 25x is just a ballpark figure.
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Most retirees have way less than 25x and they are making it work somehow. Thanks for your thought. Reply Link supernova72 June 19,pm So—on the rule of 25 factor how would you account for having a DB pension plan in the networth calc? I would take your expense minus pension and use that.
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Reply Link supernova72 June 20,pm Good point. We do not have any sources of income other than our jobs, dividends and interest from our investments, and Social Security after we retire. We plan to have 40x our expenses in investable assets when we retire in 9 years.
This means how much is the premium for the option could probably retire sooner, but my wife will only be 49 even at that time, so she will not be eligible for Social Security, nor even able to withdraw from her tax-sheltered retirement accounts without penalty. We also want to be able to financially help our son during and after college.
So we are working on having a really big nest egg. Reply Link retirebyforty June 19,pm Wow, 40x is really good. If you can handle working 9 more years, then go for it. Kurt Financial independence ratio below normal Counselor June 19,am For me financial independence means the option to choose having more time to myself over earning money and not stress or feel guilty about the choice.
Reply Link EL June 19,am Joe for me I believe it is important to strive for all three ways and cover all basis. For example if you can successfully build 10X living expenses, have passive and active income then it just accelerates the entire FI process while being happier. Reply Link retirebyforty June 19,pm I like that approach.
The first step that we should take on this journey is to stop procrastination.
You strive to increase both income and net worth, and FI will come naturally. Dividend Mantra June 18,pm Joe, Great post. Most timely for me as I recently quit my full-time job to pursue writing. I can certainly agree with you that there are clear benefits to doing something you enjoy for less money rather than put up with the higher-paying grind for years so that you can build enough passive income to live off of.
However, I think, if possible, the best way to go is to do both. If you can generate enough money to not only eke out a living doing what you enjoy but also see a little extra income which you can invest in assets that produce passive income be it rental properties, stocks, etc.
I really enjoy writing. Passive income buys you the flexibility and options necessary to pursue whatever you want, regardless of the income you may or may not be able to generate. Best wishes! Reply Link retirebyforty June 18,pm Hey, congratulation! Yeah, making money at something you enjoy is serendipity.
Financial Freedom by net worth
Good luck! Reply Link Maxxie June 18,pm Hi, Joe, I have been following your blog with interest, thanks for the great work! Reply Link Dave June 18,pm Amen to this!
A great antidote for the automated investor would be to turn off the contributions to the Roth IRA, and set up several great DRIPs for automated dollar cost averaging purchases. Check out the Computershare website, to see how efficient it is and how low the cost can be.
You can liquidate a position to access the money at any time. And as long as you meet the taxable income limits, the capital gains tax on the sale of those shares held over a year is ZERO.
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Reply Link retirebyforty June 18,pm There are many ways to access your retirement funds. Or use the 72t rule. Or use backdoor Roth. Million Dollar Ninja June 18,pm To me, financial independence means not having to work for money. Reply Link Even Steven June 18,pm I think I will continue that tradition of evaluating my financial independce goals every July 4th!
That seems similar to your thought at the end about income from other sources covering your living expenses. Reply Link retirebyforty June 18,pm Hey, I like that definition. I guess it could be difficult or easy depending on your level of income. Or still on my way? Reply Link Dave June 18,am I think you slipped backwards in defining Financial Independence by Cash Flow, when you conclude that you will ultimately see an increase in net worth. I absolutely agree about Financial Independence your own way.
We all need to be more creative for ourselves. It means using the resources you have time, money, energy, skill to develop additional cash flow. The Rich Dad Poor Dad books made a tremendous difference for me. I also credit and recommend Richest Man in Babylon for starting my family out on the right path.
Some of us take longer to come to that realization than others. That would be, having enough money to enjoy life and not outliving your money. I feel confident saying that is true of most of us.
The trick is getting to the point in your life where your acquired skills in that thing that truly makes you happy allow you to generate an income. At that point you might consider yourself Financially Secure.
Who knows? Depending on your level of enjoyment you might consider it passive income. Your point about earning income doing the thing you enjoy is right on. Reply Link Mom June 18,am I think counting on active income is a bit of a chance. Others are OK with landlording and property management.
Still others want to continue a hobby to make some extra money. I will never be completely passive anyway. I agree that everyone will have to find their answer. It will make life too passive. Reply Financial independence ratio below normal Jon June 18,am To me, financial independence is all about being able to afford to do what I want to do.