My FIRE “Aha” Moment
It was the time when Gabriel was born that I also discovered the Financial Independence Retire Early (FIRE) movement. It changed my perspective about living, as well as, my goals in life. But even while I was learning about aggressive saving and investing to earn my freedom, I did not truly know why I wanted it. Then…
I had “aha” moment early this year. I realized why I want to achieve financial independence and—maybe—retire early too. My “Why” has been staring at me the whole entire time since I discovered FIRE.
My “Why” for Pursuing FI
My “Why” is my family. I have one life to live and today will never come back. I only have one opportunity to be with my child at his current age. I will also have one opportunity to spend time with him as a teenager. I want to spend as much time as possible with him.
The time I spend with my son everyday is priceless, but equally important is my wife. When Gabriel and I are playing at the park, my wife is at work. It makes me sad thinking about it.
(Note: I work part-time as a college counselor and contribute almost equally to our monthly household expenses. I am able to do so because of my frugal habits.)
Suddenly everything is clear what I need to do. I understood why I want to achieve Financial Independence (FI). I know my “Why”.
My FI Number
My FI number is $750,000. There is an urgency to save aggressively, to increase my savings rate to 50% or more, if possible. The more I save the faster I can reach FI, and the sooner I can spend more time with my family.
Using the 4% withdrawal rate I can withdraw $30,000 each year with a $750,000 fund. I can withdraw that amount, which is 4% of $750,000, and I will not run out of money, if the remaining funds is invested in a S&P 500 index fund (e.g., VFIAX, VOO) or US total stock market index funds (i.e., VTSAX, VTI).
The remaining $720,000 will continue to grow until I withdraw another $30,000 the following year. Because of the capital gains (averaging 8% annually if invested in an S&P 500 or a total stock market index funds) and dividends being reinvested, that $720,000 will continue to grow. (The 4% withdrawal rate is based on the Trinity Study. Read more here)
With this plan of 4% Withdrawal each year, work becomes optional or as a supplement to my main source of income.
My FI Investment Strategy
I’ve described in previous posts how my investment strategy aligns with the FIRE movement:
- Invest 100% in US Total Market Index Fund with tax-advantaged accounts (403b and 457).
- Save 25x my annual expenses (i.e., $750,000 target).
- Setup to reinvest the dividends.
- Initiate the Roth IRA conversion ladder to start withdrawing from tax-advantages account without penalty.
My goal is to save $750,000 before my 50th birthday (not including my wife’s 403b or any of our pension plans). For this to happen, I need to have a very strong reason—a “Why” to keep me going, because I need to save aggressively. I have to make sacrifices in the present.
The thought of being able to spend as much time with my family in the near future is a very strong “Why”.
I don’t have any desire to stop working or to retire early (the “RE” of FIRE). I love my profession too much. But I want that freedom to say, “bye” anytime. It’s empowering to think.
Do you have a “Why?” to motivate you in whatever your pursuing? What’s your “Why” for losing weight? What’s your “Why” for getting a degree? What’s your “Why” for achieving FIRE?