At one point or another, you’ve probably wondered: “I’m saving X percent of my income. I want to move/change jobs/have a baby and I don’t know if I should.”
When you find yourself facing this situation, ask yourself another important question: “How will this delay my FI journey and am I ok with that?”
If you can’t answer this question, it’s likely because you don’t have a set FI plan, you’re just 100% focused on saving. Often times, anything that means saving less is seen as anti-FI. But people have to live their lives.
A plan will help determine if you are on track. It will allow you to make spending and lifestyle decisions within the framework of your FI journey, while still leaving yourself room to have fun.
Make Sure You’re Looking at FI the Right Way
Let’s get one thing straight. FI isn’t about saving as much money as quickly as possible. It’s about being free from financial burden.
So when you create your plan, you need to think in terms of “I want X by Y date,” rather than “I want as much money as quickly as possible.”
Saving up a pile of money as fast as you can will always leave you feeling as if you aren’t doing enough. This is why it’s more important to define your long-term goals. Do you want to by a certain age? Want to reach FI so you can travel? Do you want to reach FI to spend more time with your family?
Listen: Atomic Habits With James Clear
Crunch The Numbers
First, you’ll need to know your “FI number.” This is the amount you need to have in savings and investments to be FI. To figure this out, you’ll need to determine how much income you need per year, and then times that by 25. That’s your FI number!
Next, you’ll want to determine your time frame. You can play around with an investment calculator like this one to see what’s reasonable. You have three numbers to tweak here; your monthly contribution, your FI number, and your timeline. Ideally, you want a monthly contribution that is doable that will give you your FI number in a timeline that gets you excited.
If reaching your FI number in your desired timeframe leaves you with a monthly contribution that you can’t make, you have a few options. You could push out your FI date, giving you more time to save. Or you can lower your expenses and increase your income.
When you know your plan– to save $X per month (or year) and reach FI on Y date–you’ll know if you are on track, ahead of the game, or falling behind.
Keep Tweaking Over Time
As you live with your plan, don’t be afraid to fail. Sometimes our plans don’t work out. Adjust as you go. If you got a promotion at work and now have more money at the end of each month, look back at your plan. What are your long-term goals? What can you do with that extra money to reach them faster? Invest more? Throw more into a savings account?
Your goals and life will change but having a framework with which to work will allow you to know how these changes affect your FI plan. That means you can make these adjustments without fear.
If You Are On Track Or Ahead Of The Game
Great! Keep up the good work! Being on track (or ahead) for FI is an amazing feeling. When you are in this situation you can make decisions if/ when you get a little extra money. Do you want to save it and work to get ahead? Do you want to put it towards another project, such as renovating the downstairs bathroom? Do you want to increase your giving?
When you’re on track for FI, you have the freedom to choose.
If You Are Falling Behind
If you can’t seem to make the numbers work there is a lot you can do. Cutting expenses is a double-edged sword–it not only frees up more money to save it also reduces your annual expenses which lowers your FI number. Win-win. Earning more income also make a huge impact. Allowing you to drastically increase your savings.
Here are some suggestions for getting back on track:
Get a cheaper cell phone plan. Companies like Gen Mobile and Mint Mobile offer cell phone plans for half the price (sometimes more) of companies like Verizon and U.S. Cellular. Here’s how to lower your cell phone bill.
Cancel some of your subscription services. If you’ve used streaming services as a way to cut cable, but now pay more for those subscriptions than your original cable bill, cut some of them. You can use Trim–a subscription cancelation service and bill negotiator–to cut down your recurring bills.
Watch your grocery budget. Food costs might be an easy place to find some fat (ha!) in your budget. Here’s 12 ways to save money on groceries.
Evaluate your insurance needs. Health insurance, life insurance, disability insurance, car insurance…the list of all the insurance we have can seem never-ending. You can shop for car insurance, and see if there are any better rates out there through Compare.com. For all your other insurance needs, check out Policygenius, where you can see your rate options all in one place.
If you want to learn more about these types of insurance we’ve put together a few guides.
Drive a cheap car. Buying a used car can save you a lot of money. First and foremost, you’re not spending a huge amount of money right out of the gate. Yes, you’ll need to account for a little more wear and tear on a used vehicle, but if you buy one from a reliable source, your used car should run for years. Here’s how to buy a used car.
Get a side hustle. Earning more money also makes a powerful impact on the path to FI. Every extra dollar earned can go straight into savings, really boosting that savings rate. Here’s why a side hustle is FI’s secret weapon. And here’s some side hustle ideas to get you started.
When you know what your FI plan is (save $X and be FI on $Y date) you can calculate how big decisions will affect your journey. Decisions like “should we have another baby?” or “should I take the lower-paying, yet less stressful job” will become more clear when you can see how those numbers will affect your FI plan.
Knowing that the lower-paying less stressful job will only add two years to your FI date might make it a no brainer. Or finding out it will add 10 years might give you the gumption to stick it out a little longer at your current job. (Or maybe rethink your whole situation!)
Sometimes we have these choices…and sometimes life makes those choices for us. When surprises or setbacks occur, you can fall back on your numbers and see how they shake out. Maybe you find you need to cut your expenses more or extend your timeframe. But, as they say, knowing is half the battle. You are always ahead of the game just by knowing and understanding these principals.
Finally, Never Compare Your FI Journey To Anyone Else’s
It can be difficult to see how well others are doing on their journey to FI when you’re just beginning yours. But everyone starts from a different point and has different life circumstances and goals. Making the decision to pursue FI is one of the best decisions you can make for your finances. So trust yourself.
If you need a little encouragement along the way<, make sure you check in with your local FI group. And, most importantly, make sure you’re celebrating every milestone. Got a raise from work? Celebrate. Paid off a medical bill? Celebrate. Paid off your house? Celebrate even more!
Creating a plan to reach FI is an important part of the FI journey. Knowing if you are on or off track to reach FI will make financial (and non-financial) decisions quite a bit easier–and allow you to feel good about your journey.
Once you have a plan in place, you can adjust when needed. Got a new job with a higher raise? Organize your money so you can pay more towards your home or other debts, or consider investing more each month. The same goes for when you get sudden windfalls.
No matter what your plan is, don’t get discouraged by comparing it to others. We all start at different points on the road to FI, and any progress is good progress!
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