Author Topic: FI Milestones  (Read 8271 times)

burly

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FI Milestones
« on: July 19, 2013, 01:20:40 PM »
I like having milestones as a way to motivate oneself through the earning years... Here are mine. Please provide any thoughts... they become boring after #6.

Please note, I realize some of these may happen in a different order.

1. Positive Net worth
2. Student Loan Debt Free
3. Debt free - except mortgage
4. Net worth = 1x Salary
5. One-Tenth-Millionaire liquid assets
6. Quarter-millionaire.
7. Half-millionaire
8. Zero-Debt
9. three-quarter-millionaire
10. FI

xocotl

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Re: FI Milestones
« Reply #1 on: July 19, 2013, 01:43:06 PM »
I personally look forward to the first year for which my inflation adjusted investment returns exceed my expenses for the year as a milestone. It will probably just mean it happened to be a very good year for the market, but still something I'll be happy about.

burly

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Re: FI Milestones
« Reply #2 on: July 19, 2013, 01:47:41 PM »
Very good point. I just read the post http://www.mrmoneymustache.com/forum/share-your-badassity/i-reached-fi-last-monday/ and believe that would be equivalent to #10 on my list..

However, it really depends on what FI means to you.
« Last Edit: July 19, 2013, 01:49:50 PM by nathanc »

DougStache

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Re: FI Milestones
« Reply #3 on: July 19, 2013, 02:21:15 PM »
I view it as leveling up, that could make 6+ more exciting.

Where,

level 1 = 25 * annual spending assuming bare minimum (no spending money at all, boring meals, no travel budget etc)
level 2 = add better food
level 3 = add a travel budget
level 4 = add some spending money

At some point, leveling up further will be worth less than continuing to work.

It takes a long time to get to level 1, but I'm debating making a graph to put on the fridge and mark a higher percentage every month.  Currently ~20% of the way to level 1!

arebelspy

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Re: FI Milestones
« Reply #4 on: July 19, 2013, 04:40:53 PM »
I like having milestones as a way to motivate oneself through the earning years... Here are mine. Please provide any thoughts... they become boring after #6.

Please note, I realize some of these may happen in a different order.

1. Positive Net worth
2. Student Loan Debt Free
3. Debt free - except mortgage
4. Net worth = 1x Salary
5. One-Tenth-Millionaire liquid assets
6. Quarter-millionaire.
7. Half-millionaire
8. Zero-Debt
9. three-quarter-millionaire
10. FI

I like the concept a lot.  As you say, they may happen in a different order.  #2 won't happen for me (paying the minimums I'll be done in about 15 months) until after #7 (which should happen in about 6 months).  I hope #8 never happens.  10 may well happen before 9 for a lot of people (which may never happen, in real dollars, though it obviously will in nominal).

But, like I said, I like the idea.  Everyone's will be different though.
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spider1204

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Re: FI Milestones
« Reply #5 on: July 19, 2013, 05:28:51 PM »
Quote
I view it as leveling up, that could make 6+ more exciting.

I'm currently viewing it this way as well.

1.  Positive Net Worth
2.  I can quit my job and take me sweet time finding another one.
3.  Investments cover a dirtbag lifestyle (car/tent camping, cooking all meals, minimal travel)
4a.  Investments cover a frugal lifestyle(shared living, cooking all meals, minimal travel)
4b.  Investments cover cheap travelling(hostels/apartments, lots of slow-travel)
5.  Investments cover a luxurious lifestyle(nice house, occasional eating out, several long vacations)
6.  Investments cover luxurious lifestyle for myself and others(kids, parents, significant other)

I'm currently somewhere between 2 and 3, and debating when to take a long term break from work.  Was originally going to wait for 3, but keep becoming tempted to just go for it now.

Kriegsspiel

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Re: FI Milestones
« Reply #6 on: July 19, 2013, 05:37:14 PM »
HAH, I was just working out a RPG style levelling system for ERing! Maybe it's because I'm almost done with Daniel Suarez's Daemon books... I was thinking about a system more like spider's for XP (Elder Scrolls XP), and when you hit milestones it's like completing a quest (Fallout XP). So, Nerd Fitness basically.

NumberJohnny5

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Re: FI Milestones
« Reply #7 on: July 19, 2013, 06:07:34 PM »
Level 1 = Could survive with government assistance (basically, just food stamps). Not so much a goal of actual FI, but more of "ok, we can relax just a wee bit now."
Level 2 = Could survive without government assistance.
Level 3 = Can live a little now, occasional meal out, nice vacation once a year.
Level 4 = Live our current lifestyle, except without having work get in the way.

Should hit Level 1 in the next 3-4 years. Then we could slow down a bit and focus on other things (like buying another house). Even with reduced monies going to retirement, compounding interest will continue propelling us forward toward Level 2. I predict that we'll hit Level 4 within 15 years. If my rough numbers are right, and compounding interest will double existing funds approximately every 12 years; then if we just hit it hard and get to Level 1 then become total slackers, we'll still hit Level 4 in another 24 years (each level is a quarter, so Level 1 is 1/4 of Level 4, Level 2 is 2/4, Level 3 is 3/4, and Level 4 is 4/4); because Level 1 will take 12 years to double into Level 2, then another 12 years to double into Level 4. Of course, I don't plan on completely slacking off, but it is nice to know that once you hit a certain level, it'd be really hard to completely screw it up.

steveo

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Re: FI Milestones
« Reply #8 on: July 19, 2013, 06:28:47 PM »
Level 1 = Could survive with government assistance (basically, just food stamps). Not so much a goal of actual FI, but more of "ok, we can relax just a wee bit now."
Level 2 = Could survive without government assistance.
Level 3 = Can live a little now, occasional meal out, nice vacation once a year.
Level 4 = Live our current lifestyle, except without having work get in the way.

Should hit Level 1 in the next 3-4 years. Then we could slow down a bit and focus on other things (like buying another house). Even with reduced monies going to retirement, compounding interest will continue propelling us forward toward Level 2. I predict that we'll hit Level 4 within 15 years. If my rough numbers are right, and compounding interest will double existing funds approximately every 12 years; then if we just hit it hard and get to Level 1 then become total slackers, we'll still hit Level 4 in another 24 years (each level is a quarter, so Level 1 is 1/4 of Level 4, Level 2 is 2/4, Level 3 is 3/4, and Level 4 is 4/4); because Level 1 will take 12 years to double into Level 2, then another 12 years to double into Level 4. Of course, I don't plan on completely slacking off, but it is nice to know that once you hit a certain level, it'd be really hard to completely screw it up.

I like this idea as well. To me financial worth isn't really the right approach. My take is more based on how much future consumption I have saved up for. My levels might be a little different but this makes sense to me.
« Last Edit: July 19, 2013, 09:24:36 PM by steveo »

burly

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Re: FI Milestones
« Reply #9 on: July 19, 2013, 08:35:59 PM »
I understand your levels, but for me... your Level 1 is too far away that the task seems larger than it is. So, for me, I'll stick with the little wins/achievements and work my way up to levels!  Just like any substantial task, breaking it down into manageable and trackable events makes it much easier.

Thanks for your feedback! Hopefully more people post their milestones!

arebelspy

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Re: FI Milestones
« Reply #10 on: July 19, 2013, 08:45:52 PM »
I understand your levels, but for me... your Level 1 is too far away that the task seems larger than it is. So, for me, I'll stick with the little wins/achievements and work my way up to levels!  Just like any substantial task, breaking it down into manageable and trackable events makes it much easier.

Thanks for your feedback! Hopefully more people post their milestones!

Different for everyone.

Someone starting out with -100k net worth due to giant student loans may have "positive net worth" as step 2, 5, or 10 (or later).  Depends on their personality type, IMO.

Do you want more frequent accomplishments, or bigger accomplishments?

I'd actually scale it like an RPG, exponential rather than linear.  Hit tons of levels early from small accomplishments, which builds confidence and cements commitment, then they get further apart and harder to accomplish as you get closer to FI (just like it's easier to hit  level 2 and 3 in an RPG than level 78 and 79).
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Kriegsspiel

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Re: FI Milestones
« Reply #11 on: July 19, 2013, 08:50:52 PM »

I'd actually scale it like an RPG, exponential rather than linear.  Hit tons of levels early from small accomplishments, which builds confidence and cements commitment, then they get further apart and harder to accomplish as you get closer to FI (just like it's easier to hit  level 2 and 3 in an RPG than level 78 and 79).

SAY WHAT?

arebelspy

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Re: FI Milestones
« Reply #12 on: July 19, 2013, 09:05:30 PM »

I'd actually scale it like an RPG, exponential rather than linear.  Hit tons of levels early from small accomplishments, which builds confidence and cements commitment, then they get further apart and harder to accomplish as you get closer to FI (just like it's easier to hit  level 2 and 3 in an RPG than level 78 and 79).

SAY WHAT?

Really.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

DougStache

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Re: FI Milestones
« Reply #13 on: July 20, 2013, 06:01:56 AM »
I'd actually scale it like an RPG, exponential rather than linear.  Hit tons of levels early from small accomplishments, which builds confidence and cements commitment, then they get further apart and harder to accomplish as you get closer to FI (just like it's easier to hit  level 2 and 3 in an RPG than level 78 and 79).
Damn, good idea.  I feel like for myself the first "big" level wouldn't be bad since I've always been very okay with delayed gratification.  My wife on the other hand would probably gain some big motivation from some early wins.  Most the easy stuff is already done, but I'm sure I can come up with something.  Perhaps replacing driving with biking can grant points on a per mile basis?

Thanks for the idea!

arebelspy

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Re: FI Milestones
« Reply #14 on: July 20, 2013, 08:41:41 AM »
I'm not certain that post was to troll Kriegsspiel, but if so, I salute you!  :D
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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MakingSenseofCents

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Re: FI Milestones
« Reply #15 on: July 20, 2013, 09:47:32 AM »
I just finished paying off my student loans and it was definitely a great milestone. Can't wait until we reach high net worth levels.

Kriegsspiel

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Re: FI Milestones
« Reply #16 on: July 20, 2013, 10:23:51 AM »
I'm not certain that post was to troll, Kriegsspiel, but if so, I salute you!  :D

Yea sort of benevolent trolling. Like the stereotypical black person at a Baptist church, when the preacher is all "Aand Gaaaaawwwwwdddd will save you!" and the people are like "SAY WHAT!?"

"And Gaaawwwwddd will SMITE-AH the evil-doers!"


"OH NO HE DI'INT!"

NinetyFour

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Re: FI Milestones
« Reply #17 on: July 20, 2013, 03:08:16 PM »
This is probably a silly question, but how do I figure out my net worth?  For example, my house was recently appraised for $275K, but I still owe $240K, so do I put down a positive $35K for the house when figuring my net worth?  Also, I have $237K in retirement and IRA accounts.  Do I include that total amount, even though I guess it's not "liquid"?

Thanks for any help with these questions.

secondcor521

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Re: FI Milestones
« Reply #18 on: July 20, 2013, 09:12:08 PM »
It depends on who you ask, but in general it depends on what you're doing your net worth statement for.

For general progress and questions about your net worth, you should count all items you have of value as assets (so yes, include your house and your retirement accounts as assets), and everything you owe as liabilities (so yes, include your mortgage).  The difference between the two is your basic net worth.

Beyond that, there are many opinions about what value to assign to assets.  Should you list your house at what you paid for it?  What you paid for it plus historical appreciation rates?  What it's worth on Zillow?  What it's worth on Zillow minus the realty fees most people would pay?  What it's worth minus selling expenses minus capital gains that might be due?

If you want to get truly picky, you could use full blown GAAP accounting, but even that has many subjective elements to it.

I think as long as you understand why you're calculating your net worth, you understand the assumptions and limitations related to it, and you're consistent over time, those are the important things.  Beyond that, it's up to you.

NumberJohnny5

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Re: FI Milestones
« Reply #19 on: July 20, 2013, 10:15:48 PM »
How I figure net-worth:

Take all assets, subtract any debts, bam! Net-worth. For our house, I don't use the tax appraisal or zillow, or anything like that. I just figure what I could sell semi-quickly, if we were desperate to sell within a couple months or so. It's not exactly worth a lot, so this number won't significantly change our net worth. Same could be done for vehicles, though I tend to leave those out (as they'll tend to depreciate, and I'd have to keep changing the numbers constantly; the house shouldn't drop much in value if at all, so that's a more stable number).

For retirement planning, I would exclude things that you'll be using during retirement. So if your retirement planning has you living in your current house, I wouldn't include it in your net-worth (assuming you have equity, of course). If you're planning on selling your $5mil mansion and renting, and have figured how much rent will cost, then I'd include this number your "retirement net worth".

Perhaps this could be a feature request for YNAB? It does pretty well in separating on-budget (liquid assets) and off-budget (anything you can't tap immediately, in mine I have retirement accounts and house value). Perhaps you could have multiple account types, so something could be off-budget and count toward retirement (IRA), or off-budget and not count toward retirement (house equity).

lentilman

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Re: FI Milestones
« Reply #20 on: July 21, 2013, 07:13:08 PM »
I would add a level 0: achieving a zero net worth.

It sounds strange, but with student loans it was a huge (and amazingly happy) day for me.  It took longer to get there than to go from there to FI.

Kriegsspiel

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Re: FI Milestones
« Reply #21 on: July 21, 2013, 07:29:53 PM »
I would add a level 0: achieving a zero net worth.

It sounds strange, but with student loans it was a huge (and amazingly happy) day for me.  It took longer to get there than to go from there to FI.

We've already decided on the RPG style leveling dude, GET WITH THE PROGRAM!

arebelspy

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Re: FI Milestones
« Reply #22 on: July 22, 2013, 12:29:00 AM »
I would add a level 0: achieving a zero net worth.

It sounds strange, but with student loans it was a huge (and amazingly happy) day for me.  It took longer to get there than to go from there to FI.

We've already decided on the RPG style leveling dude, GET WITH THE PROGRAM!

Aww, don't tease the guy with one post.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.