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Friday, April 28, 2017

I’m FI

Posted by Tim Stobbs on November 22, 2016

Yes, it has happened.  I’ve hit the mathematical point of financial independence (FI).  In short, my investment income will exceed my portion of the expenses and my job is completely optional.  You see I knew this point was coming very soon, it was really just a matter of what month it occurred.  The second our investment net worth exceeded $507,000 my job became redundant, I don’t really need to be there anymore to pay the bills. So you may be thinking I should break out a bottle of bubbly and cake to celebrate, but I’m not because here is the fine print: I’m financially independent, but my wife isn’t.

WHAT?!?!?

Okay calm down while I explain things a bit.  First a bit of history, I’ve known my wife for my entire career and we have an agreement since the start of our marriage (way back in 2000).  Since I stood to earn the most out of both of us, my career ended driving where we lived in our relationship.  I’m the main reason for moving cities and my wife then picks up a job where ever we end up.  Of course she gets input to every move, but ultimately I’m to blame for all of them.  The flip side of this was the fact we knew early on I would be the one to earn more and thus we have never bothered with the idea of splitting the expenses 50/50, separate bank accounts or other such nonsense.  The money is rather ours and we work together despite the fact I’m currently putting in roughly nine times what my wife does.

So the fall out of this particular situation is getting me to FI has been the longer part of the journey, so getting here is a big deal.  My wife’s portion to get to her to FI is MUCH smaller and here is the other major factor, she doesn’t plan to quit anytime soon anyway.  After all, she is self-employed only works a few hours a day and is very picky about her clients and likes her job.  So why would she quit?  She is basically semi-retired already (or working part time, depending on how you view that half filled glass as empty or full).  I’m just trying to catch up to her.

You might have noticed our investment goal is $550,000 or higher, which is higher than the current investments.  This is because we need to put enough money aside that the money can keep growing while my wife continues to work and hit full retirement in the medium term (~ 5 years).  As I mentioned before, I’ve shifted goals to semi-retirement and thus I actually don’t need to be fully FI for both of us prior to leaving work.  Of course I do need enough investments that we can get there in the longer term and any other expenses I see on the immediate horizon.

So now the question is how much padding do you want in your calculations?  Our $550,000 number is the floor amount (which includes an emergency fund  for living expenses – $15,000 in the even the markets drop like 10% or more in a year) and now I’m just debating how many other expenses I want to pre-save prior to leaving my day job.  The list includes the following:

  • Big Vacation Fund – $10,000 (we plan to take the kids to Disney in the next year or two)
  • Renovation Fund – $5000 (money to fund various projects I want to tackle in the house)
  • Car Replacement Fund – $5000 (a start to saving for the next car)

After that I’m basically looking a bit more and deciding on what to call it, perhaps the ‘Worry Fund’. It’s sole job is to give me a bit more of cushion to put at ease all the little worries in my head that include but are not limited to: sequence of return risk, lots of stuff going wrong in the same year (like a new water heater, car repairs, travel for a funeral and house insurance claim), not getting a ‘fun job’ for a while after I leave my day job, unusual expenses that I didn’t plan on like a sharp increase to taxes or utility bills and what ever other horrible scenarios my sub-conscious can come up with.   The amount of this fund keeps going up and down as I work through various exercises and potential outcomes.  On the extreme side, the worry fund could be as low as $0 as I really don’t need it.  Yet on the other side it could be $50,000 if I want to cover everything.

The real answer I expect won’t be entirely logical, but rather emotionally driven by answering: do I feel I have enough?  Also tied to this decision will be: how much am I enjoying my job right now?  I sometimes think there is a sword fight in my head between these two concepts and to the victory goes the control of my early retirement notice.  Yet I finally came up with something simple to help me decide: I will save enough to cover the first six of my early retirement so I can be completely guilt free break after I leave work.  Cost $12,000.

So there my final target number to leave work is: $582,000.

The Stuff in Your Head

Yet perhaps the oddest thing I realized about hitting FI…it’s only a number.  My life won’t change because of it.  It does empower me to make additional decisions, but it of itself isn’t an agent of change.  No choir will sing when you get there, no rainbow will appear, you likely won’t quit work right away because you want some additional security before leaving your job.

What it does allow is you to change how you view your world.  Is work something to endured or something you choose to do?  You can decide which one you want to believe.  Do I continue at my current job or find a different one immediately? I can decide.

Yet the biggest change for me will be I’m giving myself permission to dream more about what I want my life to look like after leaving my day job.  You see for a while here I decided that dreaming too much about that was painful.  It was too far off and it just made me depressed if I spent too much time thinking about the future rather than living the present.  So now that I’m FI, I know it isn’t too long to the early retirement (ER) part of FIRE and I’m starting to think in a bit more detail about:

  • How much structure would I like in my days?  I think I want to avoid the alarm clock but having some guidelines wouldn’t be a bad idea to start with.  Going completely without any structure to my days may be too big of a shock.
  • Do I want to plan any projects for right after I leave work? A few moderate ones.  I won’t mind a to do list that I can tackle as I see fit.  So some days I may only get one item done, other may be more and others may have nothing done…no one forcing me to productive anymore.
  • How much alone time does my wife want?  After all she works from home and spends up to five hours a day by herself, so having me around all the time might be a bit of shock.  So we need to discuss this.
  • What new things do I want to do? Take a course in something new, or get involved helping out a different organization…or choosing nothing at all for a few months.
  • Just how much writing do I want to do? Does my hobby turn into a full on second career or just stay a hobby but with more time? I don’t know yet.

Yet I’ve noticed since hitting FI I’m allowing myself to actually process my emotions about coming up to ER.  I’ve had the odd dreams that are filled with feelings of being unsure of myself, tossed into a new situation and of course fear.  Fear?!?! YES fear! It is scary to leave behind the world you know and move onto something else.  Change always brings some fear.  Yet below that there is this deep relief, the tension of life is fading away and the end of a very long journey is getting close and the excitement of a new journey to start.

I don’t know exactly how this will turn out, but I’m curious to see where it goes.  Thanks for joining me on the ride so far (and reading to the end of the REALLY long post).

Comments

7 Responses to “I’m FI”
  1. RICARDO says:

    Hi Tim;
    Congrats on the FI objective.
    Personally I like to see the divs I receive as being my FI objective. In other words , can the divs pay for my retirement at least in a little part while the CRA makes me wittle down my RRSP’s
    I am single with an S.O. who does not live with me which forces me to consider only my own income.
    As to your calculations on emergency funds or other slush funds, I budget $2K per year for house maintenance. It does not cost $2K every year but overall it probably comes out to that. Such as this year it cost $4.5K for a roof job.
    I actually budget $5K per year for holidays (I like cruises) and another $5K for hobbies (golf, snowboard, etc)gifts and such. I don’t say I’ll spend that every year but it does give me a sort of goal for my FI which I questimate someplace around $60K gross (combination of CPP/QPP, OAS, Company pension and RRSP’s)
    Presentkly still working because they don’t want to get rid of me (I’m 66) so my CPP/QPP will be larger and I still contibute to my RRSP’s

    Regards

    RICARDO

  2. Domino says:

    Congratulations thats a huge milestone to hit!

    im a french canadian and I like to follow your blog since im where you were when you were 33 years old. So I got the mortgage paid and a few hundred thousands aside , but what I did differently after the mortgage is I did it, I have qui my $$ career and switched to a lower paid but fun job to me (involving being outside and drive tractors etc… no more stress, and easy schedule)

    Man I dont regret it at all, so I think you dont even have to reach FI to make the move, once you got a good start, youll reach FI anyway by doing a fun job already

    all that to say that you made a great success by hitting FI so should not worry about anything so far.Probably like me your fun job will provide wayy enough money to cover your daily expenses, and your nest egg continues to grow

    in every way thanks to co tinue to tell you moves, your fears, etc , by being honest you help people like me to plan for the near future by nowing what strategy works , how we feel when we hit this or this milestone, etc

    congrats again, thats cool

    Domino

  3. renewed investor says:

    Hi there,

    As a fellow Canadian, I am very happy for you. It’s quite a journey reaching FI. I am close to reaching FI myself. Because I am so close, I find it painful going to work every day. Being close and not yet there lol.

    Like what Domino mentioned, I could probably reach a compromise. Take a fun job, low paying doesnt matter. As long as the fun job cover my expenses, my nest egg can continue to grow so that I will reach FI eventually without feeling that I am working.

    That way, reaching FI will mean still having a purpose in life.

    Renewed investor

  4. Rick says:

    Well done! Been FI since 2004. Now run my own seasonal business, May – Oct. Will sell this year, cause I want more free time with my dogs. Nicest thing about FI is doing what you want, when you want.:)

  5. Scott says:

    Nice position to be in. You have kids at home still, right? Your monthly kids benefits will go up dramatically if your income drops. Low income living is good…..

  6. Tim Stobbs says:

    Thanks everyone…it’s nice to finally be at FI.

    @Domino – Good for you. I will get there shortly, but for now I’m using the last bit of my work to build up some cash.

    @Scott – Yes, I know…I will be touching on that in a future post.

    Tim

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