SIMPLE MATH EARLY RETIREMENT PROFESSIONAL

Things got much easier when I began collecting a professional salary as a physical therapist. I was earning $10-$12/hour working part-time while in graduate school. We started this system of paying off debt when Kim was starting out with a salary of about $35,000. The simple math worked, but it wasn’t easy. My income was used to pay off debt quickly. In our household, we reached financial independence quickly by saving roughly 50% of our household income.

$simple math early retirement$

This creates a clear advantage for people who are saving for retirement later in life. Earnings peak for most workers in their 40s and 50s. So it should be easier to save when you earn more. One of the two factors that go into creating a high savings rate is your income. Many people who begin saving later in life have several big advantages over younger savers in these two domains 1.

Only two things really matter if you want to achieve financial independence quickly… how much you earn and how much you spend.

Savings rate = (Earnings – Spending)/Earnings Investing just needs to be placed in its proper place. It will play a vital role in making your money last while supporting spending needs after achieving financial independence. The shorter your journey to financial independence is, the less time investments have to compound during this process. Many people erroneously think achieving financial independence requires great investing prowess. The greater your savings rate, the faster you become financially independent. Dissecting the simple mathĪchieving financial independence quickly is primarily a function of your savings rate. In fact, late savers have several key advantages that early savers do not. It is possible to apply these FIRE principles later in life. I want to share a counterpoint to give hope if you’re getting a late start saving for retirement. It’s hard to drastically change decades old behaviors if you haven’t saved earlier in adulthood. The math is identical if you start saving in your 50s to reach financial independence at traditional retirement age. The “simple math” of FIRE allows people who start saving aggressively in their 20s to achieve financial independence in 10-15 years and be financially independent by their 30s to early 40s. Reply to This Thread Comment (required) Name (required) Email (required, always hashed, never used nor published) Website (optional) Post comment Note that comments won't appear until approved.What is someone far behind on retirement savings to do? Can they learn anything from the FIRE (financial independence, retire early) community? I just did a quick excel sheet, and the answer to that question that looks like around 24 years: year a savings rate of 0%) how long would it take to reach a 50% savings rate if you get a 3% raise every year and save it? For instance, if your income currently equals you expenses (i.e. Check out this chart:Ģ comments for The Math Behind The Shockingly Simple Math Behind Early RetirementĪt that point, I’m not sure it could be solved in a single equation, although I could see something along the lines of how long would it take you to reach a certain savings rate. Lastly, one nice thing about this math is that it isn’t linear - it has a nice curve to it. My guess would be either he had multiple interest periods annually (versus my one) or that fact that his assumption of 5% returns included being adjusted for inflation. Each row looks something like this: =A2-5 Let’s try plugging the numbers in to see if I get the same results Mr. This explains why, if you’re able to save 100% of your income, then you can retire right now: you have no expenses! 100% of your income = expense rate % + savings rate %

Simple math early retirement