FIRE: The Ultimate Goals

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Here I’ll discuss our FIRE goals. I can’t wait to be on FIRE. Don’t they say playing with fire is fun? I’m pretty sure that playing with this kind of FIRE is a hell of a lot of fun.

Before I knew that the concept of Financial Independence Retire Early (FIRE) existed, I didn’t know what it was called or there was even a term at all. At the time, I only knew that I didn’t want to work until age 62. My goal has always been to accumulate enough wealth so I could exit the workforce 2 decades early before my peers. Time is valuable and I want to spend it doing something I’m passionate about. It turned out, many people have the same mindset as me. This is called “FIRE”. I wasn’t crazy. It’s an awesome feeling to learn that there are people out there who practice FIRE and are able to retire in their 30’s or earlier.

In my opinion, we spend too many years working. Most people spend about 16 years schooling and about 40 years working (if you’re lucky and able retire at 62). If you get to live until 80, you have less than 20 years to really live your life and that with limited physical ability.

Money is an important part of life. Early on, it puts food on the table and warms your house. Later, it provides comfort, convenience, and luxury to your life. But its greatest power is to gain you financial independence and ultimately to buy you the freedom to do what matters.

FIRE: Financial Independence Retire Early

Let me explain what FIRE really means. It means a financial state where you have enough wealth to cover your living expenses without working for a living. Hence you can retire early. The wealth can be from passive income or investment income that can support you for the rest of your life.

Doesn’t that sound awesome?

Sure, it does. Who wouldn’t want to be in that state?

To be Financial Independence (FI) or to be FIRE, you need disciplined. and it doesn’t happen overnight. It takes years to accumulate enough wealth or enough passive income to cover all of your living expense. It may sound insurmountable, but it’s achievable. Almost everyone can be on FIRE. Check out my resources page if you want to be a step closer to FI. I summarized the tools and resources I used to educate myself on the subject.

Are financial freedom and financial independence the same?

They are similar but not the same.

Financial freedom means you are debt free and financially stable. However, you still need to earn a living. Basically, you are not living paycheck to paycheck and are ready to tackle at any financial hardship that life throws at you. At this state, you have an emergency fund and are on track for your retirement (traditional retirement not an early retirement). You’re living free & clear but still working for a living. Money is not causing you financial headache. We are currently in this state.

On the other hand, financial independence is one step up from financial freedom. At this state, you don’t have to work to earn a living. You have accumulated enough wealth to cover your living expenses for the rest of your life. Early retirement becomes doable. You can do whatever you want. It’s a good financial state to be in.

Why FIRE?

Exactly. Why?

Why do we want to get on FIRE? From what I explained above, doesn’t that sound amazing to be on FIRE? You can do whatever you want. Either traveling the world or having time to do things you always wanted to do sounds amazingly awesome. You don’t even need to worry about making a living. There’s no more getting up early in the morning and going to work. Every day is a weekend. Imagine waking up on Monday and realize that you don’t have to rush to work.

It’s all about life optimization. How would you manage your money and optimize your life to get the most of it? You must think of money as a tool and not as currency. It is not about the purchasing power but instead money is a tool to give you the freedom so you can do what matters most in life.

But wait, if you retire 2 decades earlier than most of your peers, what would you fill your days with? Wouldn’t we get bored then?

You would get bored if you don’t have specific goals. If you just wanted to be FIRE just the sake of getting out of the workforce, then it’s not really a good idea. Think of it this way. You will need to come up with good reasons as to why you want to get out of the workforce so early. Just because you don’t want to work or you hate your job are not enough. You need to think what you are retiring to not what you are retiring from.

For us, we want to enjoy the one precious life we have. There are things I’m passionate about that I always want to do but work always gets in the way. The bottom line is I just don’t want to work to pay bills and then to die. We only get one take on this planet. Here is my question for you. What is it you plan to do with your ONE precious life?

Our FIRE goals: The timeline

First, have a year worth of living expenses in an emergency fund by 2020.
By 2021, have at least 25% down payment for a rental and buy it with a 15-year mortgage. The rental has to generate at least $300 in monthly net income.
Get the second rental that also generates at least $300 in monthly net income by 2023. With at least 25% down payment on a 15-year mortgage.
Accumulate $400,000 in our brokerage account by 2027. Together with the rental income, this account will fund our living expenses until our retirement money kicks in (if we decide to retire early in 2028).
We should have less than $60,000 on our home mortgage balance by end of 2027.
Ultimately, we want to be in an FI state by end of 2027. Primary residence is not paid for yet but it should be close.
A paid-for house on March 2028. At this point, we both should be able to retire early if we want to.
50 junior will finish high school in May 2030 and we should have about $170,000 in his college savings fund.

Our assumptions

So we are aiming to reach FI state by the time we both turn 50 years old. That’ll be the year 2027; 10 years from now. I’d like to get the assumptions listed here. If anything changes in the future, we’ll revisit and adjust the plan. Ten years is quite a long time. Who knows what will happen by then, right? All we can do now is to plan and follow through.

Here are our assumptions as of now:

We live in the current house and plan to pay it off in 2028.
We both keep current jobs and that with a 1% cost of living adjustment increase yearly to our salaries.
Have one kid.
Have 2 dogs and we are not planning to get more dogs or more pets.
My sister and her family live with us when they move to the U.S.. I’ll support them financially until they are able to get on their feet.
50 junior stays in a private school through high school.
50 junior is going to an in-state public university. Otherwise, he needs to come up with the difference by himself. Hopefully, the amount of tuition money we pay him to go to a private school will get him a nice college scholarship. If he wants to go to grad school, he’ll definitely need to get a financial aid or need to work.
My parents are still healthy and don’t have any major health issues.
As far as the growth of our investment calculation, I use a 7% rate of return.
If we both decide to retire early in 2028, then a 4% withdrawal rate is applied.

Our baselines

By now, you know our goals. I also wanted to mention where we were and came from financially. If you’ve been reading our yearly net worth reports, you’ll know that we’ve been in a negative net worth for all these years. Well, there’re reasons behind it.

Almost 21 years ago, Mr. 50 and I met in college while I was doing my college internship in the U.S.. A year after that, I permanently moved to the U.S. with $100 in my pocket, a backpack, and just clothes on my back to start my new life with him. I just turned 20 years old then. My newlywed husband (Mr. 50) was a sophomore in college and wasn’t working. Basically, we started with absolutely nothing; no job and no money.
Mr. 50 didn’t finish his college until 5 years in of our marriage. And he wasn’t working during those 5 years. I supported us by doing minimum wage and odd jobs.
Mr. 50 had a hard time finding a decent job after college. Regardless of our financial struggle, I insisted to go to grad school (earned 2 degrees debt free) and was hoping to get a good stable job afterward. And I did.
However, I was already in my early 30’s when I had that good stable job I was hoping for. It was also the year that 50 junior was born.
Mr. 50 didn’t have a real job until his late 30’s. It was late. Even though, we’ve been married for almost 20 years. Getting our finances right was tougher than most of the average couples (Ok, I’ll need to write a post to explain our stories – I promise it’s worth reading 😉 ).
So, we didn’t have retirement accounts until then!
We were a single income family half of our married life (10 years). Consumer debt was accumulated during these years.
Until 18 years in of our marriage, we were debt free in 2016. I managed to pay off nearly $100,000 of debt in under 6 years on one income with a toddler. Our finances are finally on the right track. It was also the same year, I decided to start this blog to share my stories in hope to educate others about life and money.

Our net worth so far

2013 Net Worth = $-310,143

2014 Net Worth = $-293,617

2015 Net Worth = $-274,318

2016 Net Worth = $69,732 A big increase in our net worth was because of 2 important events. One was we sold our underperformed rental. The other was Mr. 50 got a job.

September 2017 Net Worth = $-190,141

Here is my Personal Capital screenshot of our net worth as of September 2017

We are back in the negative zone again this year. It’s because we bought a new house. We needed a bigger house because my sister’s family will come live with us when they move to the U.S.. It will surely delay our FI but it’s still achievable within a reasonable timeframe.

If you’re not on Personal Capital yet, I highly recommend you sign up for it. It’s absolutely free. I log in to my account every day, actually several times a day. It helps me see our transactions from all financial accounts in one place. Since I started using Personal Capital, we are so much better at managing our finances. It tracks our net worth, helps plan our budget & cash flow, tracks our retirement goals, and even analyzes our investment fees. You can sign up for Personal Capital account for free here.

A negative net worth: Are we going to make it?

To be honest, I don’t know. Only time will tell. From the graph below, we will be in a positive net worth zone by 2020. The exciting point is the point where liabilities and assets crossover which indicates a $0 net worth. And that will happen around 2019! It’s just a few more years – I can’t wait.

*This estimate excludes the value of our cars, home equity, and

our kid’s college savings fund

2017 Est. Net Worth = $-248,974 UPDATE ***** our 2017 net worth was $-191,474 *****

2020 Est. Net Worth = $68,925 Positive net worth!

2025 Est. Net Worth = $799,148 Compound interest takes effect 🙂

2027 Est. Net Worth = $1,185,650 Hopefully, this will be our workforce exit year!

2030 Est. Net Worth = $1,713,774 This is the year 50 junior is graduating from high school. Hopefully, I’ll be able to retire by then.

2038 Est. Net Worth = $2,343,526 This is the year that I’ll be eligible to retire from my full-time job to get the full benefits (a pension and a health insurance coverage). Isn’t that too far away? 🙁

20xx Est. Net Worth =$xM One day Mr. 50 will eventually want to retire and enjoy his jobless life with me. 🙂

We won’t see much growth of our investments until 2025. I think that would be when the compound interest takes effect. Time is really the friend of money. Keep in mind that I excluded our car value, home equity, and 50 junior college savings fund from this net worth calculation. I wanted only real cash flow what we can count toward our FIRE.

The year 2027 is a big year for us. It’s the year that we both will be 50 years old (hence the name of this blog and our journey). We will still be paying our home mortgage but it’ll be close to $0. At this point, if we aren’t able to retire we’ll still be close to it anyway.

We plan to pay off our mortgage in 2028. If we achieve this goal, we definitely could retire early. 50 junior will not graduate his high school until May 2030. So maybe I’ll try to get myself working until he is off to college.

What we can do to accelerate our FIRE journey is either to reduce our living expenses or to increase our income or to do BOTH. We are doing both, actually. Next year we aim to hit at least a 50% savings rate. We plan to sell some of the unused lawn equipment and negotiate our cell phone contract. We have been living really frugally already. It’s kind of tough as to where else we can cut. Our major expense has been 50 junior’s private school tuition. If we can avoid that, we’ll have a lot more cash flow. However, that’s not the case right now. He’s doing so well and thriving. We believe in investing in education. So I think we are going to keep that option.

I’ll update our goals progress from time to time. However, I publish our annual net worth reports regularly so be sure to come back and check our progress. You’ll get a glimpse of our lives and our finances. You’ll also get some of my life & financial lesson learned.