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?
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It’s no secret that investing can be complicated. So, when something comes along that demystifies and simplifies it, as well as makes it financially accessible
At least once in most of our FI journeys, we have pondered what our life would look like if we started earlier. Maybe you have even wondered what value could’ve been gained if you had started in your teenage years. Well, for some context into the possibilities decision that could provide, we decided to have 17 year old listener Devin on the podcast to discuss what life can look like when you go against the cultural norm of going to college, and instead opting for an entrepreneurial and FI friendly lifestyle. Oftentimes we mention that there are rewards that come with stepping out of your comfort zone, and the same can be said for going against the societal norm and carving out your own path! For our younger audience who may be interested in getting started with their FI journey, let this episode be a useful resource and reassurance that this journey can begin no matter your age!
