Financial independence is a hot topic, but with so many different paths (FIRE, leanFI, FatFIRE, slowFI, etc), it can be difficult to figure out what's the best path for you.
Today we dive into some of the most popular ‘flavors' of financial independence and weigh the pros and cons of them. We’ll also get into how you can begin to calculate your FI number!
Is Financial Independence a Smart Path for Your Family?
Be honest with me, what do you think of when you hear the term financial independence?
Do you think of a certain number, maybe when you’d like to be retired by? Maybe travel on your own schedule not having to worry about a 9-5 again?
Do you think of it as the ultimate security blanket – an amount you have tucked away in investments or some income stream where you don’t have to worry about the bills or maintaining a certain lifestyle?
Do you see a family with very good income living a life where they’re depriving themselves of vacations, eating out, and having fun just to retire faster?
Talk to different people and you’ll get different answers.
What I'm curious about is how young families can take key principles from the financial independence space and use them to reach the goals that matter to them personally.
Sure, maybe it’s retiring or maybe it’s making sure the essentials are taken care of so you can spend more time with your family.
Two components to figuring out how it could work for you is know first off how much you need to be financially independent and what is the timeline you're looking for.
In this episode, we’ll go into that. We’ll jump into:
- The different paths to financial independence
- How to begin figuring out how much you need to retire
- Choose an FI path That fits Your family
Let’s get started!
Handy Resources for Families Looking at Financial Independence
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Free 401(k) Analysis: Blooom
- Grow Your Stash Faster: High Yield Savings with CiT Bank
- Jumpstart Your Marriage and Your Money
- Join Our Thriving Families Community on Facebook
- Coast FI: A Better Path to Financial Independence
- 10 Lessons Learned from Accidental Slow F.I.R.E.
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union!
If you live in the Triangle area of North Carolina and you’d like someone to work with you on your goals, you really want to check out Coastal’s Wealth Management team.
They’d love to help you start investing for retirement and more!
How Much Do We Need to Retire?
One of the things I get to see writing about personal finance and my site are some of the questions people have about money.
Over the years certain topics may come in, depending on if there’s a shift in the big picture like a recession or maybe it’s a certain time of year – summer where you get people asking about getting a good deal on a family vacation.
And then there are topics that perennial – year in, year out different families with of different sizes, backgrounds, and incomes type into google to get an answer to a question that’s weighing on them.
One of those questions is ‘How Much Do We Need to Retire’?
Now there are some solid back of the napkin calculators, but can you really use them for your family’s financial future?
I decided to chat with Drew Snider who’s part of Coastal Credit Union's Wealth management team to see what families need to consider when figuring out how much they need to retire.
More Than One Way to FI
Let’s define financial independence because even that gets mixed up with a related idea, FIRE.
Financial Independence: Financial is where you have enough money saved and invested that you can cover all of your expenses with.
FIRE: The difference with FIRE is there is a focus of leaving or retiring from your work. I’ve noticed that many in the community do point out how FI is the root, however, the RE is what’s the hook.
- LeanFIRE: You have enough stashed away to take care of your essential expenses.
- FatFIRE: ”It's a level where you get to live your life at the same level as your highest-earning years, while not having to work a day job.” –
- SlowFI: As you move towards financial independence you make adjustments for more quality of life choices even if it slows you down towards your FI date. –
- CoastFI: With CoastFI, you've reach a threshold where you have enough to retire at a traditional age. You can now use this ‘leverage' to align your lifestyle towards what you want during your FI years. We're at this point and love the options that have opened up for us.
- Barista FI: With health expenses being a concern for many, I’ve seen a take on FI where you maintain a part-time job you enjoy for the insurance benefits.
As you can probably guess from the podcast name Simplify & Enjoy, FatFIRE isn’t really a priority for us.
One sentence stuck out to me –
Your “FIRE number” can be an age, date, or net-worth amount when you reach financial independence and no longer have to work if you don’t want to.
And I think that can be so helpful when you're deciding on your path – what do you consider to be your FI number?
Choose a FI Path That Fits Your Family
So I’ll let you in on a secret- when I was working out the site name, I was sure I didn’t want financial independence in it.
The reason is even though how we manage our finances qualify as taking a financially independent path, it’s not the end goal. It’s simply the tool.
The principles of financial independence that I appreciate include:
- Define Your Essentials and Must-Haves
- Cut Out Noise and Status Symbol Spending
- Pursuing More Options, Typically Fewer or No Debts
- Work Optional (Type/Flexibility)
Next Week's Episode: Kids and Financial Independence
Speaking of aligning your money with who and what matters most to you, next week we’re seeing how kids fit in with financial independence.
Matt Miner, a financial advisor and father, shares his take and some practical advice on designing and weaving more options when it comes to finances and advice.
So if you haven’t already, make sure you’re subscribed. You don’t want to miss that episode. We’re on iTunes and wherever you get your podcast from!
Our music today was from Lee Rosevere and Music for Makers.
And thank you for your support!
If you have any questions or ideas for the show, please email me or join our free and private facebook group Thriving Families. We’re all about encouraging one another with our goals.
I hope you have a wonderful week, take care!