Will You Take Flight With Us?
We are on our few year countdown to our big adventure of financial independence (more on that below). Will you join us on this journey?
We are two adults + two elementary-aged kids (+ one fun loving dog!) living and loving life in Texas, and we are prepping for financial independence and taking flight in a few years. We look forward to bringing you our preparation for the journey, and Erik will share the financial side. I also plan to bring you more on family, art, and travel.
This photo is one of my favorites from a summer adventure (New York City / Liberty Island / Statue of Liberty). I think it sums up our (financial independence) adventure well ... rainy and everything isn't always easy / doesn't always go as planned but still finding joy in the rain and puddles. I also like to teach my kids through hands on adventures and experiences (and travel!). What a better way to teach about freedom and immigration than a visit to the Statue of Liberty?
And where will our flight take us in a few years? Time will tell, but we are currently looking at first stop ... Spain. Will you take flight with us?
-Tara
What Is Financial Independence?
Life comes down to choices. Every day people choose what to eat, what to wear, what to do, etc. And at the end of the day, the hope is that you live your life in a way that allows you to pursue your definition of happiness. Figuring out my definition of happiness is what led me and my family to pursue financial independence (FI) as early as possible.
The most important thing to me is time with my family. Time doesn’t stop for anyone, and it didn’t take me long to realize that I did not want to spend my time working and being dependent on a job to provide for my financial needs for the next 30+ years like so many other people my age (late 30s). I want to have the freedom to spend as much time as possible with my family.
These are the thoughts that led me to the idea of financial independence. Once I did some digging, I found out that there are a lot of other people who share this thought that time doesn’t need to be spent working for a paycheck until you’re 65 years old. There is another way (and in my opinion, a better way)! In fact, The New York Times published an article today about the FIRE (Financial Independence Retire Early) movement, "How to Retire in Your 30s With $1 Million in the Bank".
What is financial independence (FI)? FI is simply figuring out how much money you need to live on each year to cover all of your expenses. Once you figure that out, the rest is just basic math that is built around the 4% rule.
What is the 4% rule? The 4% rule comes from The Trinity Study that was conducted by professors who figured out that through all the stock market ups and downs, if a person was invested correctly (we’ll touch on this in a minute) they would be able to pull 4% from their investments year over year and never run out of money.
For example, if you need $40,000 per year to cover all your expenses then you would need investments that total $1,000,000 ($1,000,000 * .04 = $40,000). Based on the 4% rule, you could pull this $40,000 per year (with adjustments each year for inflation). You will not only never run out of money, but more often than not, you will end up with a lot more money in the long run.
What are we personally doing to reach FI as quickly as possible? We don't throw our money away. In 2013 when I first started reading about FI, I sat down and listed out all of our monthly expenses in a spreadsheet. I cut out the expenses that I felt were unnecessary (I’m looking at you Cable TV!). It took about 2 years (from 2013 – 2015) for us to trim the fat from our budget and to pay down typical debts (school loans, car loans, etc.) Once all those things were removed from our monthly budget, I realized that we could cover all our expenses just from my wife’s teacher salary (yes, you heard that correctly - a teacher's salary!). In other words, we could invest 100% of my salary (the higher of the two salaries), and starting in February of 2015 that is exactly what we did.
Where do we invest? This is the easiest part. I’m not going to provide a lot of detail on it yet, but we invest in a Total Stock Market Index Fund (VTSAX) with Vanguard. We also have my 401k which is through Fidelity that we max out, and it is invested in a S&P 500 Index Fund. I learned of this investment strategy from the Stock Series by Jim Collins. This series is amazing and anyone interested in pursuing FI should take some time to read it.
That is an introduction of our journey to FI, and we look forward to sharing this journey with you.
-Erik
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