032 | The Milestones Of FI

July 17, 2017
Jonathan Mendonsa

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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
2^nd FI Milestone: ‘FU Money’ set; 2-3 years of yearly expenses saved up
1^st and 2^nd milestone can be similar depending on your yearly spending
The 3^rd 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 7^th 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 8^th 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?