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How I Am Now Financially Independent

The Numbers Behind My Achieving Financial Independence

This has been a big accomplishment for me because back in 2012 I decided that I wanted to get a hold of my finances. I started with YNAB, got directed to a few wonderful blogs/forums and realized that I didn’t have to follow anyone else’s path to early retirement.

I started out with nearly $180k in debt consisting of  credit cards and student loans. I had another $250k in mortgage debt that I owed on a condo I owned in San Diego. By 2013 I had a net worth of a little under $50k and only $120k left in debt. I sold the condo and broke even on that transaction.

My NW in comparison to my student loans.

One of my favorite books and websites was and is Jacob Lund Fisker’s. Reading his writing made me realize that an intentional lifestyle design was critical to my success. I learned that in order to achieve my goal I needed to live a life that made sense not only to me but was globally sustainable – which means that if everyone else decided to do the same thing it would improve the world and not drain it.

I have now reached the point where my investments can generate a passive income that would cover my basic overhead. And that sentence is my definition of financial independence. As a matter of fact, that’s when a business is considered successful, when it can cover its overhead. And I view myself as the CEO of my personal finances.

My basic monthly expenses. I would need ~$300k invested in order to generate this income passively.

In the above snippet from my google spreadsheets I have my overhead calculated at $1,023 per month or $12,300/yr. This is what I would need if I decided to stop generating any more money from a job. The $200/mo is how much health insurance would cost me from my State’s health insurance exchange.

I would like to maintain my board certification in case I decided to still moonlight, teach or volunteer as a doc. I calculated that at around $50/mo.

I have a paid off condo which has ongoing expenses, totaling $393/mo. This is a nice little inflation hedge for me. If I were renting and inflation got out of control I would be hurt because I am operating off of a ‘fixed income’.

How come my fun-categories look like I became a monk? Well, I’m trying to cover my basic monthly expenses. I don’t care to have money set aside for dining out, socializing, movies, traveling etc. If I want to do those things I can always generate some side income either through moonlighting or a business or other means. I think Thunder From Down Under is having a casting call in Los Angeles next month.

So I would need about $12,300/yr to run my household. The ‘4% WR’ in that spreadsheet is what I think my investments can generate. Most diversified wall street investments can passively generate around 4% per year, net. So, if I need $12,300/yr I would need to have a little over $307,000 invested.

Don’t like wall street? Don’t trust the market? I could also keep that money in cash. If I have another 50 years to live then I would need $615,000 under my mattress or in a savings account. The only problem with this method is that inflation tends to chew off some value from your savings. The other option would be to buy a rental property that will net me $12,300/yr. Or buy a business that will earn me $12,300/yr. You get the picture. The latter 2 options are much more inflation protected.


How much do you think your basic monthly expenses are? Take a quick guess.

How much would you need saved & invested in order to cover it?

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