16/06/2024
When I first started on this journey, I estimated a particular level of passive income required to fund our cost of living and used the 4% rule as a guideline to estimate how large our portfolio would need to be. Since I came up with this target close to a decade ago, I’ve steadfastly adhered to it in my mind. However, I’ve realized that this is wrong, or at least partially.
With the run up of the market over 2023 and 2024 our portfolio has actually hit my original lean FIRE number, YESSS!!!! However, with our cost of living rising slightly, this goal has shifted. Recalculating, our position using 2023 cost of living things now look like this:
In a previous post I’ve written about how inflation, particularly lifestyle inflation affects financial independence, but I’ve only just been made to realize that I haven’t put it into practice. What I really should have done was recalculate our FIRE number periodically based on previous year’s expenses. So going forward I will be doing this for the FFE house once a year, and I expect the above graph to change with the market as well as with our cost of living.
The key takeaway from this post is that financial goals are tend to be qualitative, and relatively stable. Whereas the quantitative parts, investment income and portfolio size requirements, tend to be more dynamic. This means that to more effectively understand where we are at in our financial journeys we should be periodically reassessing the quantitative requirements.
Engineer your freedom