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032 | The Milestones Of FI

In today’s podcast we discuss the Milestones of FI with Joel from FI 180; this is a new look at the path to FI and the milestones along the way.

Podcast Episode Summary

  • The ‘Milestones of FI’ with Joel from FI 180
  • We welcome Joel as our first repeat guest on Choose FI
  • The Milestones of FI as a ‘master’s degree’ journey after Dave Ramsey’s baby steps
  • Joel plans to be fully FI in January 2018
  • Joel is completely debt free and is shooting for $25,000 per year in other spending
  • FI creates a “magic money making machine” that spits out yearly ‘checks’ (the 4% rule)
  • FI is the ultimate luxury purchase to save for this ‘magic money making machine’
  • The Dave Ramsey Baby Steps explained
  • To get started on the Milestones of FI: Debt Free and/or $1 of positive net worth
  • First FI Milestone: $100,000 net worth when you first start getting calls from Personal Capital to setup a phone consultation
  • 2nd FI Milestone: ‘FU Money’ set; 2-3 years of yearly expenses saved up
  • 1st and 2nd milestone can be similar depending on your yearly spending
  • The 3rd milestone is ‘Half FI’ which puts you halfway to FI in total spending, but actually more than that in terms of time on your FI path
  • The path to FI is not linear and Joel explains
  • Milestone #4 is ‘Lean FI’ which means you have enough money to stop working forever if you cut out the discretionary aspects of your budget (about 30% of Joel’s budget)
  • Lean FI is an ‘emergency fund that would last forever’ as it covers your housing, food and other essentials
  • Lean FI is perfect for people with a side hustle to do it with no risk
  • The ‘crossover point’ could be another Milestone of FI. This is where your portfolio increase is more than the income you’re earning from your job
  • The next milestone is ‘Flex FI’: This is a ‘5% rule’ or 20x your annual spending in your total net worth
  • Flex FI is only viable for people who can build flexibility into their lives from year to year depending on the market returns, etc.
  • FI is not one milestone but a smooth continuum towards this goal
  • Flex FI has an 82% chance of success according to the Trinity Study (75% stocks, 25% bonds)
  • Financial Independence is the 7th 25x your annual spending.
  • All the work you do after you reach FI is completely optional. Now you can do what you want with your time.
  • When you reach FI you can pick and choose what you want to do at work and in life
  • The 8th milestone is ‘Fat FI’: This is 30x your annual spending which is the “closest thing to a sure thing” you can get in life
  • Where is Brad in milestone continuum?
  • Where is Jonathan?
  • What does Alexis and Joel’s milestone celebration look like?
Listen to Brad and Jonathan’s thoughts about this episode here.
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