Michelle and I often discuss the “FI Number”: your annual spending x 25. This is the amount of money you need in your nest egg to retire [based on the Trinity study, see show notes]. By retire, we mean you can live off this amount forever assuming you take a 4% withdrawal every year for your annual spending.
Knowing my FI number helped me set a goal that I could move toward, but knowing these three additional numbers gave me a clearer picture of what my finances really looked like relative to my future. Those three numbers are your (1) Coast FI number (2) Lean FI number (3) Fat FI number.
Here are quick definitions from the How To Money blog.
Coast FIRE: When you sock away enough in your early working years that later on, you don’t need to prioritize saving and investing.
Lean FIRE: Your investment portfolio can fund all of your basic needs in life, but not much else.
Fat FIRE: A hefty annual stipend, enough for you to live off – and more.
Create a FI Map
I found it helpful to create a map of my FI numbers so I can better understand where I am at relative to my FI numbers.
Of note, I used the Coast FI calculator linked below to calculate my Coast FI number in this graph. I have used a compound interest calculator in the past and came up with a much different number (150,000). I think this is likely because the Coast FI calculator is considering inflation. The FI number based on the trinity study already accounts for inflation. I believe this is why there is a discrepancy between my own calculations with a compound interest calculator vs. the coast FI calculator, but if you know please comment below!
Knowing the above numbers helps me track my current net worth against these four benchmarks to know where I am on my FI/RE journey. I am not aiming for Fat FIRE, but it is a nice number to know. Though many of us fear not reaching our FI number, we may far exceed our FI number in many scenarios. It makes me think, if I have more than enough for myself, what could I do for my family, friends… the world?
I love knowing my Coast FI number too! Once you hit Coast FI, then you can literally work any job that pays your annual bills without contributing another dime to your investments and still be able to retire at the traditional retirement age. I am playing with this idea right now. Do I want to work a “fun job”? Maybe as part of the parks department or with the library? Maybe just work significantly less hours? Maybe just a few months a year? What would you change?
These aren’t just calculations. These are multiple different possible future realities and options to consider. Knowing my numbers gave me the courage to take a high paying job in the middle of nowhere because I truly knew what those additional dollars meant on the FI map above. On the other hand, many people are already FI and have no idea because they do not know their numbers. This could mean working additional years unnecessarily- taking away time from passions, family, friends etc.
Try playing around with your numbers and let me know of any insights you have in the comments below!
The gators are out here in Charleston. Statistically, not knowing one’s FI numbers results in more harm than alligator attacks annually ;)
Show Notes:
“What is F.I.R.E., the Different Types, and How to Achieve” It by How to Money
“Trinity Study” - Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable
How to calculate your FI number by ChooseFI
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