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Retirement Discussions / FIRE Wannabees
|Subject: Re: My FIRE toolbox||Date: 8/8/2003 6:39 PM|
|Author: workwayless||Number: 240 of 5085|
Can you fill us in a bit on how you saved for FIRE and the instruments you invested in?
- Proposed FIRE Budget and funding strategy
This is one of the tools that I'm interested in hearing more about.
My funding strategy consisted of two major components:
1) Lowered expenses
2) Invested as possible
About a dozen years ago, I made a pivotal decision--that I wanted to become less dependent on my job just in case I would get laid off. My largest expense was housing, so I bought the cheapest housing that I could find--within my safety boundaries of course--wouldn't move next door to a crack house, LOL.
At that time I really didn't have a defined goal of ER and had never heard of REHP. I had a good paying job and since I didn't get laid off during that timeframe, I mostly blew the extra money on trival stuff.
That is until I read about the book "Cashing in on the American Dream". I decided that one day I too would RE. So the first thing I did was eliminate my debt. The largest loan was a car payment so I made triple payments in order to pay the car off in less than two years. And after the car was paid off, those payments went into my brokerage account. One of the secrets I learned is if I didn't see the money, I'd be less likely to spend it. And I made sure that I didn't have easy access to the brokerage account--no ATM card for me! I also maxed out my 401k contributions. My investment choices were pretty boring--mostly index funds and individual bonds.
As for my retirement budget, my initial strategy was what is recommended in "Your money or your life": as you become more conscious of your spending, it tends to decrease and your savings tend to increase. If you were to chart both of those numbers, at some point your savings will be able to provide enough funds to cover your expenses. At that point, you are FI.
One of the problems with this approach is that you might have expenses that are much more expensive after ER, for example health care. While I worked, I had the option of employer-subsidized premiums. A few years ago, I elected to obtain non-employer provided health insurance. This allowed me to have a more realistic estimate of my post-ER expenses.
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