Perhaps it’s better to work for yourself, even if that means sacrificing a cushy corporate salary.
#Mrmoneymustache shockingly simple math free#
Perhaps it’s better to work part-time so that you have more free time and flexibility built into your schedule. Perhaps it’s better to work at a low-stress job that allows you to leave your work at the office when you physically leave the office. Perhaps it’s better to take a slow, enjoyable path to financial independence instead of a fast, miserable path. However, I’ve recently begun to question this idea. = good.Ĭonversely, since most people associate red with “bad,” it’s assumed that a longer path to F.I. Since most people associate green with “good,” it’s natural to assume that a shorter path to F.I. When I first created the grid shown above, I used a subtle color scheme to emphasize an underlying idea: the smaller numbers on the grid are shown in green while the larger numbers are shown in red. Should You Sprint to Financial Independence? The higher your savings rate, the shorter your journey to financial independence. spending of $40k, income of $100k) will allow you to hit F.I. annual spending of $40k, after tax annual income of $80k) will allow you to achieve F.I. Note: The grid assumes you start with $0 and earn 5% annual returns.įrom the grid you can see that a 50% savings rate (e.g. based on various levels of annual spending and post-tax income: To illustrate this, I created the following grid a couple years ago that shows how long it will take to achieve F.I. Simple math tells us that the higher your savings rate, the faster you will reach financial independence. If you spend $100k per year, then you need ($100k * 25) = $2.5 million to achieve F.I. So, if you spend $40k per year then you need ($40k * 25) = $1 million to be financially independent. Financial independence is typically defined as having 25 times your annual expenses saved up.
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