Tracking Progress to Financial Independence

Last year during my maternity leave, I had the opportunity to disconnect from the daily grind of work and found myself inspired by a few books I read during that time. One in particular, was “Quit Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required” which my brother recommended and introduced me to the FIRE community and the possibilities of retiring earlier in life. Personally, I spent the greater part of my early adulthood scrambling between jobs, barely able to keep a functional car on the road. I was hooked on the idea of self-sustaining my income and no longer worrying about my ability to stay employed. My goal was to be able to provide for my family regardless of outside influences like layoffs or plant closures and eliminate any associated stress from uncontrollable events.

Fast forward almost a year, and I have gradually increased my savings rate even more and have made it a common goal to put aside 50% of my income. Regardless of income, your savings rate ultimately determines how many years you must work until you can retire, more on that here. In previous years, I’ve always set targets for how much I would take out of my paycheck for savings, loans, etc, and generally enjoyed the flexibility to spend the rest without too much effort on tracking my expenses. Since my interest in FIRE, I still follow a similar method, however, have been tracking my net worth monthly and watching it gradually increase.

This week, I decided to create a visual that helps me see my progress towards achieving my goals. My exact goals for Financial Independence continue to fluctuate as I refine what that future lifestyle might look like, however, my Lean FIRE goal remains relatively steady. For me, Lean FIRE is the peace of mind to know I can get by and cover most necessities without dependency on employment. Lean FIRE may also give the flexibility to transition to a different career path that is more rewarding regardless of pay if that is something that interests you.

Lean FIRE generally is described as the ability to achieve financial independence, but you may need to dial back some of your spending habits or supplement your income. Depending on your situation that may mean no kids, living in a low-cost living area, not traveling, downsizing your home, or giving up luxuries like going out to eat, getting a professional haircut, or owning a car. You may need to still work part-time, or start a side hustle to cover all of your expenses. Traditional FIRE, however, is the ability to replace all of your existing expenses without significant changes in your lifestyle. Fat FIRE is typically considered the ability to retire with some lifestyle increases, such as new hobbies or travel when you have additional free time.

So how did I create this visual to help track my % completion towards my Lean FIRE, FIRE, and Fat FIRE goals? Since I was already tracking my net worth monthly, I compared that value to the Financial Independence target I set for each category. If you’re not familiar with calculating your FI number, you traditionally take your estimated annual expenses that you will need to support that lifestyle and multiply it by 25. You can read more about that in my previous post here.

Personally, I see achieving Lean FIRE as a significant peace of mind. I have no intention of retiring early anytime soon, but I sleep better at night knowing I have options versus feeling stuck paycheck to paycheck. It is very rewarding to visualize that progress from 40% Lean FI up to 60% of that goal in less than a year. I know a good portion of this jump is due to investments performing very well, but the increased focus on savings has played a role in this as well.

I’m currently in my mid-30s, and regardless of recent inspiration from the FIRE community, it’s critical to focus on saving for retirement early in our careers so that we can take full advantage of compounding interest over 30-40 years of working. How do you track your progress towards retirement, whether FIRE focused or more traditional? Are you happy with your progress, or are you looking for opportunities to improve?

  • Looking to increase your income so you can grow your savings rate? Read about our experiences with two different career paths and evaluate your return on investment.
  • Want to calculate your Financial Independence goals? Read more about that in the 4% Rule.
  • How many years will it take you to reach Financial Indepdence? Regardless of income, it comes down to your savings rate.

4 thoughts on “Tracking Progress to Financial Independence

      1. Once I’ve started playing the same differently that’s when things started to change for me.

        I took certain steps; multiple savings accounts, 6 months of emergency money, and over 100k in available credit to name a few.

        Then it hit me that it’s not only about scaling back and saving more, it’s about increasing your income.

        That’s what got me into day trading and investing!

        Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: