- Intellego Newsletter
- Posts
- Freedom Number
Are you ready to embark on your FIRE journey?
🎼 📖 Read Intellego #026 by listening to:
Outspoken
I will start this edition by going straight to the point. Let me ask you three questions:
Do you find yourself stuck in a job you don’t like?
Are you serving customers you don’t identify with?
Do you strive to do your best, but you feel like “something” is missing in your life?
Here is the truth. The primary source of our frustrations is money. Or better saying, most of our worries stem from the lack of it...
But how can a piece of paper or digits in a bank account can rule our lives and decision-making?
The recipe is simple. Somehow, we end up stuck in situations that we dislike, only to impress people we don’t care.
We’re seduced by what money can offer us - power, status, influence, goods, pleasures... But we’ve become slaves to our own creation.
However, there is a way out. Calculate your freedom number and start walking the path to financial freedom.
Let me explain to you…
Discovering this magical number is the key to free yourself from the 9-5 rat race. With the help of compound interest, your freedom number will become smaller than you’d imagine.
“First, find your why. Then, figure out how. Think long-term, take small steps and keep moving.”
How much do you need to pay your bills, create an emergency fund and have leisure, even if it’s not luxurious? We had this conversation before here.
The freedom number is the amount of money you need to earn every month to cover your expenses and have a little left to invest in your future freedom.
Maybe your number is $3,000… $5,000… $10,000 or even more per month…
It’s none of my business. The point here is to create an action plan to reach that amount by doing something you enjoy.
Saving $1 million… $10 million… $50 million… it’s an overwhelming task, don’t you agree?
Instead, focus on earning your freedom number, preferably by doing what you like to do. Yeah, it will be difficult in the beginning, but it will pay off at the end.
Life is like playing chess. The circumstances of the game change all the time. Choose to adapt to them. Even better, study your opponents and plan your next moves.
“Many judge prostitutes, but don’t we sell time for money?”
Definition of F.I.R.E.
Financial Independence, Retire Early (FIRE) is a financial movement that advocates for individuals to achieve financial independence and retire earlier than the traditional retirement age.
The core idea behind FIRE is to save and invest a substantial portion of your income during the working years to amass enough wealth that generates sufficient passive income to cover living expenses indefinitely.
This approach allows people to have the freedom to retire from their jobs and pursue their passions, hobbies, or any other activities without the need to earn a regular income.
How to Calculate the FIRE Number
The FIRE number is the amount of money needed to achieve financial independence.
This number is based on your annual living expenses and you can calculate using the 25x rule, which is derived from the Trinity Study.
The study suggests that withdrawing 4% of your investment portfolio annually is a sustainable way to cover living expenses over a long retirement.
Here's a step-by-step guide to calculating your FIRE number:
Determine Annual Expenses: Calculate your current annual living expenses. This includes housing, food, transportation, healthcare, entertainment, and any other regular expenditures.
Adjust for Future Lifestyle: Consider any changes in lifestyle you foresee upon retirement. Add or subtract expenses based on your retirement plans.
Apply the 25x Rule: Multiply your adjusted annual expenses by 25. This figure represents the total amount of savings you need to achieve financial independence. For example, if your annual expenses are $40,000, your FIRE number would be $1,000,000 ($40,000 x 25).
Account for Inflation: While the 25x rule provides a solid estimate, consider accounting for inflation over the years until you retire. Using financial calculators or consulting with an independent financial advisor can help refine this number.
“Wealth consists not in having great possessions, but in having few wants."
Benefits on achieving FIRE
The goal isn't more money. It’s creating a lifestyle aligned with your values and dreams.
What are the empowering advantages of achieving FIRE? Here are some:
Freedom of Choice: You choose how to spend your time. Without the need to work for a paycheck, you can pursue passions, hobbies, travel, volunteer work, or even start new ventures. You do things that genuinely interest you without financial constraints.
Reduced Stress: Financial independence can lead to a significant reduction in stress related to job security, workplace politics, and financial emergencies. Knowing that you have a financial cushion allows for peace of mind and improved mental health.
Time for Personal Growth: With financial independence, you have the time to invest in personal growth, such as furthering education, learning new skills, or engaging in creative pursuits that can lead to personal fulfillment.
Quality of Life: Many people on the path to FIRE find that simplifying their lives and focusing on what truly matters leads to a higher quality of life. This can include healthier living, stronger relationships, and a more balanced lifestyle.
Traps on achieving FIRE
What are the potential challenges to consider on your path to FIRE? Here are some:
Extreme Frugality: The path to FIRE often involves extreme frugality, which can lead to a deprived lifestyle. Constantly denying yourself of basic pleasures and necessities to save money can negatively impact mental and emotional well-being.
Sacrificed Present for Future: In the pursuit of financial independence, people might sacrifice their current happiness and well-being. The relentless focus on saving and investing can lead to burnout, strained relationships, and missed opportunities to enjoy life in the present.
Market Dependence: The success of your FIRE plan relies on how well financial markets perform. Economic downturns and market volatility can impact the sustainability of retirement funds, which might force you to return to work or cut back your living expenses.
Healthcare Costs: Retiring early means losing employer-sponsored health insurance, which can be a significant financial burden. Navigating the healthcare market and affording comprehensive coverage without a steady income can be challenging and expensive.
Longevity Risk: There is a risk of outliving your savings, especially with early retirement. Increased life expectancy results in a longer retirement period than initially planned, requiring more funds to sustain the desired lifestyle.
"The farmer has to be an optimist or he wouldn't still be a farmer."
Conclusion
Did I give you enough reasons to dig deeper into the concept of financial independence?
The FIRE movement offers a compelling vision of financial freedom and early retirement, promising a life of choice and personal fulfillment.
However, it requires rigorous planning, disciplined saving, and a keen understanding of your financial needs and goals.
While the benefits of achieving financial independence are substantial, it is crucial to be mindful of the potential downsides.
A balanced approach that includes thoughtful planning and realistic expectations can help you navigate the journey towards financial independence and early retirement with success.
The opportunity is in front of you, but it’s up to you to decide. I know what I want. I hope you’ll know too. Don’t miss the bus. That’s all for today.
“Financial independence is about having more choices."
Talk to you next week.
Light and peace,
—FMV
PS: Summer is here. Drink water, apply sunscreen, repeat. 🏖🌞
🧠 My Mental Download:
📕 (1) What I'm reading:
🎧 (2) What I'm listening to:
🤓 (3) What I'm studying:
🤿 Keep diving and exploring:
💡 Gain insights to better understand the world.
✍️ Written by Fabíola Maia-Veres every Tuesday at 7pm.
🐝 Newsletter is powered by BeeHiiv.
💬 📝 How did it go?
Any comments, critics, or suggestions? Reply to this email or reach out on Instagram or LinkedIn. Your feedback fuels my writing.