9/2/2024
In my post about ‘The shifting target of financial independence’ I talked about the need to reassess our position yearly to figure out how close we are to financial independence. I’ve recalculated our figures using our 2024 spend and this is what it looks like:
And for comparison, these are the figures from June 2024, calculated using 2023 annual spend:
Unfortunately, despite our portfolio climbing in the second half of 2024 we’ve actually gone backwards. We are currently only at 87% (2024 spend) of our lean FIRE goal compared with 93% when calculated using 2023’s spending.
What are the causes?
While I don’t publish our numbers on this blog, I can say that our 2024 annual expenses rose significantly over 2023. Inflation accounts for a portion of this with insurance costs, council rates and utilities increasing as they typically do but a much bigger driver is our own lifestyle inflation. Here are some of the biggest contributors:
Food
The cost of food, including eating out, rose by 40%. The biggest reason for this is me working full time in the city, as opposed to being away around 20 days a month where all meals are paid for the by the company. Additionally, the city has so many restaurant options that we’ve given in to some temptation to eat out more frequently.
Transport
Like food, transport is also up around 40%, funny that when you’re not away on company funded work you are responsible for paying for your own travel.
Health and Fitness
While I like exercising alone most of the time in our home gym, my wife prefers group fitness classes which we’ve resumed paying for in 2024.
Holidays and Entertainment
Some extra holidays and staycations in 2024 accounted for a roughly 20% increase in costs over 2023. Being in the city full time and the reduced need to go to bed early the night before an early morning flight has allowed us more time to go out for entertainment.
The common theme
At the end of 2023 I moved back to the city to as I felt that after more than a decade of working away it was time to be in the city and reduce my work hours. It was also convenient timing as the job that I was working on was coming to close. I guess it’s to be expected that most of the biggest drivers of cost-of-living increases are associated with living in the city as opposed to working away. While some costs that were transferred from the company to our household are unavoidable, the other costs are my own example of how, when give more opportunities to spend, people will spend more.
Concluding thoughts
Even though it is a bummer to have briefly qualified for lean FIRE mid-year 2024 only to be kicked out of the club due to our own lifestyle inflation, I’m largely comfortable with the position that we are in. The part of me which is laser focused on achieving goals wants to clamp down on all expenses to get back on track ASAP. However, I need to recognize that life satisfaction is not exclusively based on achieving FIRE. We are in a strong financial position and already have some freedom to optimize for other things in our lives. As long as we are not wasting money it’s ok to continue accumulating wealth and take a couple of extra years to join the lean FIRE club again.
Engineer your freedom