Tuesday, 1 August 2017

FI34,27

Last calendar month my FI-number was 34,98. Or 35 years.
This meant that my assets divided with my annual budget would simply speaking last 35 years. This I call the Financial Independence number.
This of course comes with a few conditions:
- Price increases in the future need to be compensated by interests or dividends. Or additional income.
- I need to live within the annual budget. This is a very frugal budget but it is also a budget that I have lived within for several years now. However, this is with the current lifestyle and changes in lifestyle will need to be addressed with (possible) changes in budget. I will not reduce the annual budget but I may consider increasing it. The annual budget always needs to be larger than the annual needs and costs as it is impossible to predict everything and the funds need to be available also for accidents. See Eye on Savings. Not the disastrous, life-changing accidents of course. For those, the annual budget will need to change.
- If the growth rate of my assets is higher than the price increases, I could safely withdraw a certain amount every year without reducing capital. I know the SWR numbers and I put no trust in it and do not use that. My financial future does not include any financial risks at all.

I count my assets the first every month, excluding any possible value of my apartment (as I always will need to live somewhere) and the value of any pension funds that I cannot access until I retire. This includes both private and national pension rights as once paid into, I have no or very little control over the value. They will however pay out in about fifteen to seventeen years.

Last calendar month the stock market were my money are placed, went down. Since then, it has gone down further. I have bought some stock in companies that I believe in but where the fickle and short-termed stock market discounted the value. These shares were bought with savings from this months salary (as I still work four days a week).

The current financial independence number is 34,27, meaning I can float financially within my annual budget for another 34,27 years. I have lost half a years annual budget in a month - at the same time, there has been several months in the past when I have gained as much or even more in a month. Swings and roundabouts - stock markets and financial risks.

I keep one months moving costs on a debit card, six months total costs on an easily available savings account, ten years in stocks and the rest in solid index funds. I also still have a job and keep myself updated with qualifications, trainings and merits.

It has taken many, many years of savings to get me to a position like this. However, it has only taken me six years to change my life so that my spending is low, my lifestyle is frugal and my work is to make money - not my life. Not an easy process by any means, but possible for anybody.

6 comments:

  1. I am afraid to find out my FI number. I am impressed by all the work you have put into this, if only more people thought this way. I know I need major work in this area.

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    1. Just start with counting you assets; the rest starts changing almost automatic after that. You know you can do it!

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    2. 35 is an impressively high number. It implies you only need an income yield of 3% of your capital, growing in line with inflation. I believe certain investment trusts could provide you with a real dividend stream of 4-5% of your capital indefinitely, so you wouldn't need to worry about market fluctuations at all. Email me if you want to discuss portfolios.

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    3. Thanks, but I know the theory and the practice of it.

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  2. Wish I wasn't so old. I'm running out of energy to work for many more years. My wife could never do it and she is 8 years older than me.

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    Replies
    1. I am too, it is not only a matter of age.

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