I recently achieved a net worth equal to 25x annual expenses (4% withdrawl rate) at Age 27! I translate this to mean that I will need to continue working for money in some form or fashion, but with the freedom to leave my current employer at any time and remain unemployed for a few years (i.e., FU Money).
I still have a ways to go, before reaching my FIRE Money Milestone, which I consider to be roughly 38x annual expenses (2.6% withdrawl rate).
With the notable exceptions of having been born to intelligent and industrious middle-class parents that paid my way through school, I have not enjoyed any significant windfalls or other unusual benefits that are not available to most other US citizens that attend state universities. I have achieved this milestone primarily by working hard to obtain employment in a well-paid field, in a well-paid industry, with a subjective merit-based compensation system. I have continued to work hard, to be rewarded by my employer's (S&P 500 Company) merit-based compensation system and obtain overseas assignments that offer expatriate premiums. I have not received stock options, bonuses, or anything other than an annual salary that changes year-to-year based on performance, experience, and US labor market conditions.
Frugality has also played a part in this financial success. I would not be considered exceptionally frugal by MMM standards. However, my average annual expenses are significantly lower than those of my peers and co-workers.
Ultimately, my approach to personal finance has been similiar to MMM's, and can be summarized as:
- Make financial independence a high priority (Make as much money as you can, as early as you can!)
- Enjoy hobbies and interests that are relatively cheap
- Base purchasing decisions primarily on relative "return on investment" (happiness/cost)
- Occasionally review and optimize costs, when it is worth the time and effort to do so
- Do NOT strictly budget expenses or savings (which could limit ability to take advangate of unforseen opportunities and/or cause unnecessary stress)
- Invest savings with the intention of maximizing long-term risk-adjusted total return, as appropriate for the market conditions (flexible asset allocation) and diversify these investments into businesses (stocks & bonds) or derivatives (ETFs, mutual funds) with transparent risks that I understand.
