Physician on FIRE
Physician on FIRE

🔥 What Financial Independence Can Do For You

Email sent: May 21, 2020 5:13am

Is this your brand on Milled? You can claim it.

Hi Milled,

What exactly is financial independence?

The variety we talk about represents freedom from the need for earned income of any kind to live the life you want. It means you're done saving for retirement, and you've set yourself up to spend your days however you please.

You can claim financial independence (FI) in one of two ways or some combination of both.

Based on retirement savings, once you've accumulated 25x to 30x your anticipated annual spending, you've got enough to start out with a 3.3% to 4.0% annual withdrawal, a low enough percentage that makes it very unlikely you'll ever run out of money (and likely that you'll have more than you started with even decades later).

You can also claim FI by virtue of having passive income that exceeds your expenses. As long as those income sources are reliable and low-risk, and they don't take up much of your time, if any, you should have no need for active income.

It's common to use a combination. For example, if your passive income meets half of your spending needs and your retirement savings (in stocks and bonds) are 15x your annual spending, the combination would make you financially independent.

What do you do with this thing called FI?

That's up to you! The "RE" in the FIRE acronym suggests that you can retire early. That's certainly an option, and it's one I've sorta kinda taken. But I do have this blog, so I don't feel 100% retired. Retired not Retired, I like to say.

There's so much more you can do, though.

FI gives you options. It gives you leverage. You'll have the power to walk away if you want.

When you can afford not to work at all, you can obviously afford to work less. I worked a wonderful part-time schedule for the better part of two years before calling it quits. It allowed us to slow travel internationally and get a feel for what full retirement might look like.

Perhaps you'd like to transition to a new job that pays less, do more research or teaching, or do something completely different. FI can be the launching pad for an encore career doing whatever you like. If your current job isn't your dream job, you can try to find our create it with little or no risk.

How do you get from Point A -- wherever you are now -- to Point FI?

That discussion is on the docket for you tomorrow. In the meantime, you can hit me up with any questions by replying to this email.


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