I reached FI last Monday

[secondcor521]

I reached FI last Monday.  It took basically 20 years from when I graduated from college.  It was simple but not easy.

I minimized expenses.  I minimized taxes by maximizing my use of tax-free and tax deferred investments and by being a buy-and-hold investor into index funds.  I minimized interest expense by avoiding high-interest rate loans, paying attention to interest rates when deciding where and when to send additional principal payments, and refinancing my mortgage when it made sense.  I minimized use asset expenses such as maintenance and depreciation by living in a modest house with a modest car.

I maximized income through a good education (BS and MBA), solid work effort, and taking advantage of a few good opportunities when they presented themselves.

I focused on my goal and measured my progress.  I have written financial goals that I review regularly.  I have Quicken data to the penny for the past seven years, and an Excel spreadsheet that augments Quicken with my own calculations for life insurance, college expenses, retirement, living expenses, and a YMOYL-style wall chart.  One thing that has been particularly helpful to me for the past seven years has been listing all of my financial goals, prioritizing them, and then focusing on them one at a time.

I went through a divorce in 2006 that was short-term financially very damaging because we split our net worth in half.  However, over the longer term, with higher income and a much higher savings rate and a much lower expense run rate, I have probably reached FI faster than if we had remained married.

A lot of my reaching this point can be credited to my parents, who gave me a good financial start in life with a good financial education, a paid for college education, my first car, various gifts over the years as part of their estate planning, and a living example of how to do it (my dad retired at age 55).

Some of this seems to be rubbing off on the next generation.  My oldest son has enough money in his college account to pay for college, but he has a full ride plus stipend and 23 AP credits.  He emphatically has no plans to borrow anything.  I've told him I will split whatever of his college fund that he doesn't spend with him 50/50 (my 50% will just roll down to his brother and sister), so if he plays his cards right he can graduate from college debt free with $40K in the bank.  Since he will probably live like a monk due to his personality, he might be able to retire on that :-).

Thanks for reading.

[arebelspy]

Congrats!  What an amazing accomplishment.

Any changes planned in the near future?

EDIT: Seriously, ridiculous, I'm in awe.  Who gets divorced at 37 with 3 kids and yet hits FI at 44?  You've gotta be doing a TON of stuff right, I'm very inspired.

[yolfer]

Congrats! I love your summary of how you accomplished this. I should tape it to my bathroom mirror.

Don't let us married guys read the part about how divorce can get you to FI quicker! Sometimes when I'm in the doghouse with the Mrs., I'm thinking the same thing. :)

[Eric]

Helluva job!  Congrats!

[Random]

OMFG, the fundamentals really work!  Stunningly great job.

What changes for you now?  What new doors open wide?  What old doors do you kick shut?

[oldtoyota]

That's awesome! Congratulations!

[matchewed]

:D

[footenote]

Hollah - wow! Congrats

[skyrefuge]

I reached FI last Monday.

Awesome! I especially like the bit about your son.

I just made a post where I noted how it's a bit of a fallacy to point to a single date as my "millionaire day", but that day can actually be measured much more precisely than an "FI day", which has many more assumptions baked in. As someone trying to figure out how and when I can declare FI, I'm curious what your specific metric was. A pure dollar value in net worth? (maybe held over that threshold for a prescribed duration?) Expenses that brought your assumed withdrawal rate below a particular percentage? You won the lottery on Monday? I guess I wonder, if the market drops 3% tomorrow, just as I'll no longer be a millionaire, will you no longer be FI?

[pac_NW]

Disciplined!

[secondcor521]

Thanks everyone!

First, a few things I forgot to add.  Choosing to go into engineering and then engineering management helped on the income side of things because those jobs tend to pay well.  And other than the divorce I have been fortunate to not had any major financial setbacks -- my kids and I have been relatively healthy, I haven't been sued for anything, and my house hasn't been hit by any tornadoes or floods or fire.

@arebelspy and others who asked, I don't have any significant changes planned.  My job is, in the big scheme of things, reasonably enjoyable, and I would not mind saving some more to increase my FI safety margin.  Also, with my younger kids in middle school and junior high and parents nearby in declining health, I'll probably stick around here and keep doing what I'm doing for a few years.

While we were married, we did a lot of things right financially.  We saved maybe 20% of our income in later years, and we managed to make a nominal profit on the three homes we owned (sequentially) due to good purchase decisions and a rising real estate market.  So even though the divorce set me back by half, the half I was left with was still a significantly positive net worth.  Over the last seven years, I basically ramped my savings up to about 50-60%, and my income over the past four years has been pretty good.

@Random, the doors that shut are the doors where I worry about reaching FI via inheritance - that won't happen because I did it without that.  And the door of worrying about being 52 and getting laid off - ageism is alive and well in America, unfortunately.  And the door of waking up and realizing I hadn't started saving for retirement or my kids college and facing another 15 or 20 years at a job while wanting to quit has shut as well.  The door opening is just one where I can relax a little...now I can choose between having a financial disaster and still being better off than most, or quitting now and puttering around for the rest of my life, or working a few more years by choice to have a better standard of living.  All three good choices.

@skyrefuge, my specific metric was when my annual spending rate (as calculated by my last three months spending in Quicken annualized) dropped below 4% of my current FIRE stash.  I have been fortunate as well that my particular set of investments have been going up steadily for the past two weeks -- I'm mostly tied to the S&P 500 index.  So I've managed to remain FI for about 10 days now, but yes, if the market swoons a lot or my expenses go up a lot, then I'll become un-FI again.  If that happens, though, I'm still working and saving over half my income, so it should over the next few months or years become a permanent thing.

You also mentioned assumptions, which I think is an important point.  In saying I have reached FI, I do make a number of assumptions.  What I have tried to do in the area of assumptions is:  (1) document them, (2) base them on reliable, long-term data when possible, (3) try to balance positive and negative ones, and (4) do sensitivity analyses to see which ones my financial plan really relies on.  At the moment, I have nine negative assumptions where if my assumption is wrong it will make things worse for me; among them is "4% is a SWR at my age".  I also have seven positive assumptions, where if my assumption is wrong my financial situation will be better than I expect; among them is "I won't obtain any more wealth from my stock options".

[nktokyo]

Cool stuff - have a martini

[cerberusss]

I have been fortunate as well that my particular set of investments have been going up steadily for the past two weeks -- I'm mostly tied to the S&P 500 index.

Isn't now the time to move your investments into something less volatile than stocks?

[pom]

Congrats! I hope you will celebrate some.

My plan when I reach it: scotch and cigar!

[velocistar237]

I have been fortunate as well that my particular set of investments have been going up steadily for the past two weeks -- I'm mostly tied to the S&P 500 index.

Isn't now the time to move your investments into something less volatile than stocks?

Withdrawal rate would plummet and he would no longer be FI.

[secondcor521]

Another thing I think I should explain lest my scenario become fodder for the side of the "math doesn't work" with which I disagree:  in some sense, my savings rate is actually higher than 50-60%.

Of the increase in my net worth, approximately 50-60% is directly retained via actual savings and mortgage principal reduction.  About 50% of the remaining amount goes to income taxes, which will go nearly to zero when I RE - this is so because there I currently have to pay taxes on most of what I earn because of my job, but when I RE I will only have to pay taxes on what I spend, which will mostly fit into the standard deduction and exemption amounts.  About 50% of the remaining amount goes to child support, which will go to zero in approximately seven years when my youngest child graduates from high school.  I spend the remaining amount on everything else (food, clothes, recreation, utilities, insurance, etc.).

So I am, in one sense, I am really only spending (50% * 50% * 50%) or about 1/8th of what I am earning, which is extremely helpful for achieving FI.

@cerberusss, regarding your question about my asset allocation.  You are correct that I am currently essentially 100% invested in stocks.  I have thought about reducing my equity position but haven't yet for several reasons:  I am still working and don't have any intent to RE for another few years.  I am quite risk-tolerant by nature.  The optimal asset allocation with respect to portfolio survivability for longer retirement periods is quite heavily weighted towards stocks.  And finally, I am somewhat reducing my overall risk profile by stockpiling cash and (danger Will Robinson - unpopular opinion arriving) paying off my mortgage.  In perhaps another year, my mortgage will be gone and my expenses will have dropped even further such that I will be at perhaps a 3% withdrawal rate.  Being 45 and having a 3% withdrawal rate from a 100% stock portfolio with about a year of expenses in cash is something that I think I will be quite comfortable with.  All that being said, moving to a 80/10/10 portfolio is something that is on my list of things to move towards at some point because I'd probably be even more comfortable at that allocation.

[velocistar237]

If you don't mind, what do you get for this:

(annual savings)/(annual savings + predicted annual retirement expenses)

Don't include interest income in your annual savings number.

[secondcor521]

velocitar237, I get a value of about 0.81 for that expression.

[RadicalPersonalFinance]

First, a few things I forgot to add.  Choosing to go into engineering and then engineering management helped on the income side of things because those jobs tend to pay well.  And other than the divorce I have been fortunate to not had any major financial setbacks -- my kids and I have been relatively healthy, I haven't been sued for anything, and my house hasn't been hit by any tornadoes or floods or fire.

Don't sell your good planning short.  You chose a career that pays well and developed yourself and your own abilities.  You're probably healthy because you pay attention to the things that are under your control for that.  If you were sued or experienced a devastating weather event, you probably have a backup plan and appropriate risk management strategies in place.

It's easy for people to forget that this is not luck, it's planning.  Bad things happen to good people and good planning makes their impact much less.

[MakingSenseofCents]

Congrats!

[Nords]

I reached FI last Monday.  It took basically 20 years from when I graduated from college.  It was simple but not easy.

One of the pleasures of hanging around forums for a few years is watching the long-time posters reach their goals.  Congratulations!

I went through a divorce in 2006 that was short-term financially very damaging because we split our net worth in half.  However, over the longer term, with higher income and a much higher savings rate and a much lower expense run rate, I have probably reached FI faster than if we had remained married.

If you're ever interested in a guest post on The-Military-Guide.com, I could really use a "voice of experience" post on the subject of financial recovery after a divorce. 

Some of this seems to be rubbing off on the next generation.  My oldest son has enough money in his college account to pay for college, but he has a full ride plus stipend and 23 AP credits.  He emphatically has no plans to borrow anything.  I've told him I will split whatever of his college fund that he doesn't spend with him 50/50 (my 50% will just roll down to his brother and sister), so if he plays his cards right he can graduate from college debt free with $40K in the bank.  Since he will probably live like a monk due to his personality, he might be able to retire on that :-).

Those AP credits are worth their weight in gold, aren't they?  I hope his younger siblings are paying attention.

Speaking of profit-sharing, he might want to use those funds to max out his IRA and his 401(k) match.

[Theadyn]

Awesome!

[Reepekg]

Those AP credits are worth their weight in gold, aren't they?  I hope his younger siblings are paying attention.

The best kept secret of avoiding college expenses. With 26 AP credits, I graduated with my engineering degree a year early saving $40,000. Worth a bit of extra studying in high school, I'd say.