ep.019 – recalculating the financial independence equation

Welcome to episode 19 and hope you are having a great Friday. Before I get into this episode here is a little bit of an update on FI movements. So I have been paid today and switched $7,500 straight away to the 3-month notice saver account and will make sure we add at least $500 by the time the credit card is due on 25th Feb to stay on our $8k per month target. Also regarding that 3-month notice saver account, we have actioned a $21k transfer out of this account which will land in 3 months time with no penalty interest so we can pay our maximum 5% extra off the home loan, to get the capital contributions higher on the mortgage. So two months into the new decade and we are happy with the progress and saved over $16,000 this year so really pleased with that.

Now back to this episode, and my rants/preaching whatever you want to call it… Well this last week, Leish and I have been incredibly productive, last weekend was all work, work, work as Rhianna would say – but not in that filthy way- tut tut
Rhianna… but rather in a get stuck into to Aleisha’s married.co.nz website sort of way. As I mentioned last week

I was working on a website revamp and last weekend we decided to dust off the mirrorless camera and get all vogue and carry out a photoshoot on the majority of the married products – and what a result. We learnt so many things from this process, the best thing we really got out of it is, is proof that we can work really well together and play to our strengths to produce a beautiful and hopefully more profitable outcome. This is really good to know at this early stage of our FI journey, as important as income generation is in the short term it is good to know that in the long term we are able to work well and more importantly enjoy working on a passion project together – as this results in a complete change of the FI equation.

You see as I have mentioned before I hate the retired part of FIRE, and when we are official ‘FI’ (in inverted commas)… as no one can see me I am flashing the international sign language for inverted commas… So being able to generate income outside of passive or semi-passive investments like stocks or property we can also take into consideration income generated through passion projects, you know things we actually love to work on –
but get paid for it all at the same time. Now don’t get me wrong I am not saying I am passionate about flowers, this is Aleisha’s area as it falls nicely under her love for creativity and making people happy. For me, my passion lies in technology and business problem solving, I love creating businesses and organically growing them – not necessarily to their true potential but to the potential where it can sustain our family lifestyle.

So what does this mean to the FI equation? Well, I love the maths behind the 4% rule but having to explain this to those, not in the FI community can be quite daunting. For instance, the last time I tried, I explained that the amount you need to live on is actually a lot smaller than you first may think and say for us we could be FI with $40,000 per year expenses, the 4% rule means that you would need to save 25 times this figure i.e. 1 million dollars to diversely invest and earn enough interest in the long-run that the original capital contribution should not decrease. The response was, how can you live off $40,000 in Auckland, and I said well it assumes a fully paid off house for our circumstances anyway. This is extremely hard for most people to get their head around if they are not even at the start of an FI journey, 1 million in the bank and mortgage-free can sound ridiculous depending on where you live. But… the insight this week is, does the magic number to save have to be 25 times your annual expenses? If you can create a working lifestyle that is so enjoyable and soul-fulfilling and that also brings you and income then surely not, this figure can be much lower. For instance, if you are able to build a passion business that pays all your expenses and you have developed the business to a point where it is generating consistent returns and you are mitigating risks by being able to pivot or diversify your talents into other industries as the world evolves – you my friend are already FI – congratulations!

This doesn’t just go for business owners but also for the self-employed and even those of us gainfully employed by someone else. The first base is done you enjoy your work, the second base is can you make this work sustainable in the long-run, the third base is developing the position you are in so it actually is sustainable in the long-run and the fourth base my friend is that home run of financial independence! I have got to third base with Leish, well you know what I mean – filthy mind – just like Rhianna! High school innuendo aside, we are in the midst of developing our FI future and we are both loving the journey, yes it is hard work and a lot of hours but it is so worth it, and importantly we are taking Gary Vee’s advice we are going to be patient, we know it will pay off if we put in the hard yards now and in years to come many people may be very aware of married.co.nz
and it will hopefully be playing a large part of our newfound financial independent status.

So what is episode 19’s lesson in a nutshell?… Well it is don’t get completely caught up in the maths, yes depending on how your mind works this is easy to do, just like my mind I find maths beautiful and I am never too far away from a trusty spreadsheet or calculator. But, just because the maths works in one scenario doesn’t mean you can’t add additional parts to the equation that balance the original equation into one that is far more palatable for your life. For example, don’t be stuck in a dead-end job, slogging your guts out to save 1 million dollars after paying off your mortgage, this may not be right for you especially if you truly hate how you currently generate income, so why not consider a side-gig – it is getting trendier and for a reason, it is so easy to do nowadays and it will be a lot more prevalent in the future. I don’t believe this is a fad my FI friends, so get if it is right for your – taste and get on the side-gig bandwagon and whether or not it is right for you… until next
time… happy fiday.

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