FI TERMS:
- Financial independence: Having enough money to pay your living expenses for life without working
- 4% rule: Withdrawing 4% of your portfolio each year when in retirement without risking running out of money
- Stocks: when you buy and own a piece of a company and own a little bit of money that it makes
- Bonds: when you loan money to the company
- Index fund: A basket of stocks
- How is it different from a normal stock?
- Inflation: When prices in the economy increase and are worth more
- Interest: Amount of money paid for using someone else's money
- Credit: Borrowing money knowing that you will pay it later
- Debt: State of owing money
- Credit score: A number that shows how good the person is at repaying their loans.
- Why is it important?
- Federal Tax: Tax collected by the Federal Gov for Fed Gov bills
- State Tax: Tax collected by states to pay State bills
Milestones of FI
Milestone (Can be 1st or 2nd)
Personal Capital to track your accounts in one place. Personal Capital Phone Call you to set up an account, first milestone.
Milestone (Can be 1st or 2nd)
FU Money, 1 or 2 years of essentials/savings. Having enough money to make a comfortable decision on where you choose to use your time. This is if your job is asking you to choose between ways you spend your time. Being able to be comfortable about what you choose gives you power.
Milestone 3
Half FI mark, motivational milestone (you saved half of the amount). Allows you to see the halfway point of your FI journey. Since the journey is not linear and depends on the person/market, you are really about 2/3 of the way of becoming FI. The earlier part of your FI journey is going to take a long time to save for. Time is valuable and works for you. Start early!
Milestone 4
Lean FI, you have enough money to stop working forever as long as you cut out the extra stuff in your budget that you do not need. No matter what happens, things are covered for you. Living lean is to live off of the emergency fund that would last forever. Lean FI is perfect for a side hustle.
Milestone 5
Crossover Point- Money working more than your income
Milestone 6
Flex FI, 20 times of annual spending or 5%. This is when you are FI and can be flexible with it. You have flexibility in your spending.
Milestone 7
FI, saved 25x annual spend. Achieved FI point. You can stop working or have optional work. Directing your time at things you want to do.
Milestone 8
Fat FI, You saved 30x your annual spendings.