Everyone knows the first rule of Financial Independence Retire Early (F.I.R.E.) is to take your annual spending and multiply it by 25 to get your F.I. number, right? (OK, its a bit more complicated than that…roll with me.)
But what if you can’t exactly know what your spending will be in retirement?
For example, what if the post-retirement life you’re planning is very different from the one you’re currently living? Like, you’re going to go travel the world, places you’ve never been and do things you’ve never done?
How do you go about determining if you’ve reached the magical F.I. number?
That’s exactly the situation I found myself in. I could only come up with one solution – go live the life I want, and reverse engineer my way to a F.I. number.
Here’s my experience with designing a new life, figuring out how to afford it…..and advice for you to become your own financial engineer.
The Cart Before The Horse Doesn’t Work
When I was considering leaving my corporate job, I was obsessed with one question – do I have enough money?
What I wanted to do was travel the world! And the job was in the way.
For years, I had been very aggressively saving. I invested in rental properties to bring in passive income. And it was paying off – the net worth number was getting up there! But was it enough?
I did my best, scouring the internet for cost of living information, I tried to envision what life, post cubicle, would look like. For every possible scenario, I made a projected budget.
“I have enough if, if, if….” But at the end of the day, there were just too many unknowns!
First of all, I didn’t even know if I would like traveling full-time! I had done my best to experiment with long trips. But the longest I had been able to go travel was one month. There is a big gap between one month and possibly forever!
Would I miss home, would it cost more than I think, would I hate it? What if I got bored, what if it turns out I want something different?
Eventually, I came to realize: I was putting the cart before the horse, trying to see if I could afford a life I didn’t yet know!
The machine was built wrong, so it was up to me to “reverse engineer” it – and while it was running.
Only One Way to Find Out!
I would just have to take the leap and start living the new life I thought I wanted! There was no way for me to know how exactly I would want to fill my time once work and location barriers were removed – until they were removed.
Of course, I wasn’t reckless. I had hobbies and aspirations, cash on hand and more than a few back-up plans. But I did not delude myself that I had actual knowledge of how it was going to go!
So, at the age of 45, with only what would fit in a Volkswagen Jetta, which included my partner, dog and cat, I quit my job and set off to experiment – a year of traveling around Mexico!
Finally, Actual Data!
A year later, I was able to do a full assessment and reflect on how this new life was going. And there was a lot to think about – changes, surprises, wins and losses to sift through!
Armed with the precious data that I so needed, I could finally set out to figure out the question – am I Financially Independent Retired Early?
To be honest, I’m still not exactly sure. It could turn out to be a prolonged sabbatical. I can’t see forever into the future, but I can imagine the next few years. And things look good!
Spending has been roughly in line with what it needs to be for my portfolio to support me long-term. I’ve found a cadence between travel and staying put that feels both sustainable and enjoyable.
So, I’m not running back to the cubicle tomorrow!
However, I want a few more years of data points in different types of travel scenarios. For example – next year, six months slow traveling around South America! Stay tuned…
Why Not Just Save For All Scenarios?
Originally, my F.I. plan called for me to have roughly double the amount saved. If everything had gone according to plan, it would have taken about 4 more years of extreme saving, working my ass off in a job I didn’t like.
Yes, at the end of that time, I would likely have been able to travel anywhere I wanted, with little financial worry. Or, I could afford to buy a new camper van, if I fancied one.
Okay, I would totally get one right now, if money were no object! But, my experimenting this past year shows me that I would rather have free time to travel right now than a brand new Sportsmobile van, as dope as they may be!
As far as I know, we don’t live in a multiverse, so I can’t pop into another version of my life to see how it worked out. All I can do is live the one I have in front of me.
And for me, my job situation was becoming increasingly terrible.
Also, the type of travel I want to do involves backcountry hiking and camping. And every passing year I could feel the difference in my body’s ability diminishing. I really didn’t know that future me in 4 or 5 years could crawl in and out of tents and scramble up mountains.
Factors In My Favor
When considering the risks, I had several factors in my favor. Fortune has smiled up on me, allowing me to pursue such a drastic lifestyle re-design. I am grateful, and know that not everyone is so lucky.
I don’t have dependents to worry about providing for currently, or in the future.
There were no big health issues in the way. But that can always change, which was actually a factor pushing me to go sooner rather than later!
Also, I have a supportive partner! Having someone on the same page, who has skills and assets that compliment mine, is of enormous help. I know people can do it alone – but I hope I never to have to find out if I can!
Lastly, being relatively young, with some decent transferable skills, I felt relatively confident that I could re-enter the workforce – if the experiment failed.
Get Horse and Cart In Order
Are you dreaming of a sabbatical, career change, retirement or some other drastic lifestyle upheaval? Here’s my advice, to get financially and mentally fit.
Build F.U. Money Stockpile
Somewhat akin to an emergency fund. Technically, its money set aside, so if your job sucks, you can tell your boss to “fuck off” – but I see it as that and more. You can also use it to take the risk of stepping into good situations, not always just to flee bad ones.
It needs to be liquid money and not in tax-advantaged account. So, the equity in your home or your 401(k) don’t count. We’re talking brokerage, safe assets like money market, CDs, maybe a little bit of broad market equity index funds.
And mentally, you have to consider the pot of money as set aside for the F.U. purpose. How much it needs to be, is up to you, your goals and your risk factors.
Start Problem Solving
All our lives we have problems. So, start getting better ones. The only way to do that is to start solving the problems in front of us. Then do it again, and again, and again.
Start with small problems, not big ones. Step outside of your normal self, and try new ways of approaching problems. Then, make a system for continuing to solve problems as they arise.
That is the only way to build the confidence and resiliency needed to accomplish big changes. Change is basically solving one small problem at a time.
Start Experimenting
Start gathering your data!
Thought experiments have their place, but when it comes to finding out stuff about yourself – you must go actually do things. And if you want to know if you can afford something, you have to know how much it really costs.
Knowing yourself and how much stuff costs is the only way to determine what is worth something to you.
Gather as much real-world knowledge and experience as you can. Think about it, reflect upon it – interrogate it for answers.
Be An Engineer!
Whether you want to be or not, you are the engineer of your life. You decide where your precious resources go. You decide where to stack the building blocks.
Not that we have perfect control of everything, mind you! But to some extent, whether we are conscious of it or not, we are all making decisions every day that will affect the ultimate structure of our lives.
If you don’t like the way your life is stacking up, you can change it!
But we’re all adults, right? It has to be done mindfully, without harm to others or undue risk. Don’t just rage quit your job. Or move to an exotic location you’ve never been hoping it will be a geographic cure for all that ails you.
Like an engineer – plan, stress-test, use data! Start making the most spectacular, but structurally sound, uniquely yours – LIFE!
Live a Life You Love
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