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Comment by baccredited | Hacker News Reader

Saving for FI (Financial Independence)

If I save at my current rate I will achieve FI in 2022. If I had started saving aggressively sooner I would already be FI (I'm in my mid forties). I hate answering to other people and would rather work on my own stuff. FI will get me there.

Read the book The Simple Path to Wealth to understand the process. Or this blog post is a good start: http://www.mrmoneymustache.com/2013/02/22/getting-rich-from-...

Another great resource (read the sidebar and FAQ on the right) https://www.reddit.com/r/financialindependence/

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Step 1:

Have a job that allows this to be feasible.

You'd be amazed at how many people have achieved Step 1 already, yet who are completely oblivious to the follow-on steps of achieving FI -- or even just saving, living well below your means, etc.

Some people only realize 15 years later, after their industry tanks and they're laid off. Then they think, "If only I'd been more aggressive about saving early... I could 'soft retire' now instead of stressing like mad to find gainful employment." The good news: if you're still in your working prime, you might still have time.

The really shitty situation is folks who hit retirement age and only then realize that their savings are insufficient. Govt welfare won't cover you, and you may be past your prime working years (depending on industry or type of job), and instead of having an enjoyable retirement around grandchildren, you're stuck worrying about how you're going to pay for meds. Then you're just fscked.

TL;DR: Even if you don't think you need it now, your future self will thank you!

Since most everyone can live on less than they have, this is already the case for almost everyone.

Deciding to live permanently at your current level is actually step 1. If you can't do that, then you'll have to increase salary, yep.

what does FI mean in your case -- retirement? i would think that means something different to everyone

The FI half of FIRE is generally not about retirement. (RE = retire early) but rather getting to a point where you have enough money that you don't need to go work a 40-60 hour a week job. Maybe you could retire but choose not to, and instead take long periods of time off and/or work something part time while pursuing other interests.

FI means different things to different people, but generally just means you have some FU money.

So... describe the moment you realized this.

probably May 2014 when I plugged my spending and net worth numbers into https://lab.madfientist.com/ and it came back with: 9 yrs until FI

I had always been a guy who spends less than he makes but that kicked my ass into gear.

here's similar calculators without needing a sign-in: http://mustachecalc.com

I like the default assumed 7% interest

That's pretty standard as the assumed interest rate for investing in index funds over a long period.

The figure of long-term 7% real returns is accurate assuming a 60-40 stock bond portfolio, averaged over around 100 years of US stock market. This estimate does not include the information about the current over or under valuation of the stock.

However, if you start investing now, in 2016, not at some average starting time in the past 100 years, note that the US stock market is over-valued according to the CAPE metric. As well as average real returns of 7%, historical data also makes a strong case for CAPE valuation being a good predictor of expected market returns over the following 10 years.

If your long-term forecast takes the additional information of the current over-valuation of the US stock market into account, the 10-year forecast of expected real returns for a 60-40 stock bond portfolio is roughly 4-4.5%.

One fairly obvious way to mitigate this might be to over-weight your portfolio to focus on stocks that are currently regarded as under valued by the CAPE metric instead of simply investing according to current market capitalization weights.

Further details in this article from 2012 (things look slighly more over-valued 4 years later): http://www.researchaffiliates.com/Production%20content%20lib...

That's a moment I wish I could relate to ;)

I find it really reassuring to see you saying that while in you mid-40s. Due to a series of stupid financial decisions in my late twenties I'd kind of given up on the thought of doing anything much more than getting by, guess I should do some reading and get that sorted.

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