Episode description

032 | 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. In Today’s Podcast we cover: 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? Links from the show: The Milestones of FI at FI180.com Mad Fientist’s FI Laboratory cFireSim Early Retirement Now Fiery Millennials Personal Capital (affiliate link) Slowly Sipping Coffee