Hello from Jay and Paul! We are passionate about setting goals and creating to-do lists on a whiteboard, as these actions motivate us in daily life. While we didn’t always love this approach when it came to our jobs, everything changed when we discovered the financial independence movement. It’s amazing how finding a life purpose, goal, or dream can transform your daily life.
Until 2016, our lives revolved around climbing the career ladder and buying a home, believing this was the prescribed way to live. We took pride in our quality of life, rewarding ourselves with luxurious holidays because “we worked hard, so we deserved it!” This mindset trapped us in a cycle of working hard to spend hard, then needing to work hard again—a classic example of the rat race.
Our luxury and comfort brought fleeting happiness, even as we doubled our incomes and built two homes. Over time, we realized our goals were shaped by societal expectations and parental guidance, not by our genuine desires. We felt stuck, unsure of how to break the cycle.
Discovering Financial Independence
Our breakthrough came when we stumbled upon an article about the Financial Independence movement. I still remember the moment vividly—it was as if a beam of light had shone directly on us, guiding us like a lighthouse to sailors lost at sea. Have you ever experienced such a moment?
We started discussing what we wanted to achieve and how we could get there. Paul and I love delving into fundamental issues—it might sound boring, but it’s crucial. We questioned what we truly wanted in life. Approaching financial independence seemed exciting but we knew it could also be a challenging journey.
Defining Our Goals
We asked ourselves: “Are we aiming for FIRE (Financial Independence, Retire Early) or just Financial Independence (FI)?” While these terms might seem similar, we believe it’s beneficial to break them down:
TFism 1 – Semi FI
Here, passive income from investments or side hustles covers half of our annual expenses. This stage doesn’t mean full financial independence but offers a significant degree of financial freedom, reducing reliance on full-time work.
TFism 2 – FI
This stage is about financial security without the need to retire. It’s akin to an entrepreneur who could retire but chooses to keep working. At this point, one might continue working not for financial necessity but for personal fulfillment.
TFism 3 – Semi FIRE
At this stage, work is part-time or project-based, providing enough to cover basic living costs and allowing for some luxuries. It’s about working because you want to, not because you have to.
TFism 4 – FIRE
This is the ultimate goal—complete financial independence and early retirement. Here, you have sufficient passive income to not only cover all expenses but also enjoy a comfortable lifestyle without financial constraints.
In 2017, we calculated that having $1 million in shares, yielding roughly a 4% dividend (about $40,000 annually), would allow us to live comfortably without full-time work in South Asia or Australia. However, achieving this would require at least eight more years of saving 60% of our income.
Instead, we opted for a more immediate goal: reaching Semi FI within four years, aiming for a $20,000 annual income from investments. This would free us from full-time employment but still require some income to cover living costs.
Life Changes and New Adventures
Now, in 2024, things have evolved significantly. We took the bold step of leaving Australia to live in the Philippines, embracing a life filled with new learning opportunities and a business venture. This move has redefined our lifestyle and what it means to live a fulfilling life.
Exploring Broader FI Concepts with Detailed Financial Estimates
As we navigate our path toward financial independence, it’s enlightening to consider the different stages within the FI spectrum, each with its own financial targets and lifestyle implications:
LeanFI
Achieving LeanFI means your passive income solely covers your basic living expenses, without room for luxuries. For instance, if you spend $40,000 a year, reaching LeanFI would require investments that generate this amount annually, assuming a 4% safe withdrawal rate. This translates to needing a portfolio of about $1 million. LeanFI champions a minimalist lifestyle, emphasizing living within your means without indulgence.
CoastFI
This stage is reached when you have saved enough that you no longer need to actively contribute to your retirement funds. For example, if you need $1 million for a comfortable retirement and you’ve already amassed $500,000 by age 30, this amount could potentially grow to $1 million by age 65 with a 5% annual return. CoastFI allows you to use any additional income to enhance your current lifestyle or save for an earlier retirement, providing great flexibility without jeopardizing your future financial security.
FatFI
FatFI represents a stage beyond basic financial independence, offering a substantial financial cushion that supports a high-quality lifestyle. If you desire a lavish lifestyle costing $100,000 annually, you’d need around $2.5 million in investments, based on a 4% withdrawal rate. This surplus ensures comfort and the ability to afford luxuries like frequent upscale travel, expensive purchases, and generous financial gifting.
The TwogetherFIsm in 2024
To put these concepts into perspective with our personal journey towards financial independence:
Semi FI
Our initial target was generating a passive income of $20,000 a year to cover half of our estimated annual expenses of $40,000. This would allow us the freedom to engage in part-time work or projects we’re passionate about without full-time income pressure. To achieve this level, we needed to invest $500,000 in dividend-paying stocks, aiming for a 4% yield.
Full FI
For full Financial Independence, where we no longer need to work for money, we estimated needing $40,000 annually. This required a total investment of $1 million, assuming the same 4% yield, to cover all living expenses comprehensively. This stage allows us to pursue work that we love, not because we need the money but because we enjoy the activity.
FIRE (Financial Independence, Retire Early)
For FIRE, where we aim to completely step away from mandatory work, we anticipated needing a larger cushion due to our desire to include discretionary spending freely. For a comfortable lifestyle that includes regular travel and luxury experiences, we calculated needing about $60,000 annually. This would require a portfolio of approximately $1.5 million, allowing us to withdraw 4% per year while maintaining our investment principal over the long term.
Our Personal Journey to Financial Independence in 2024
Applying these detailed financial estimates has profoundly shaped our savings and investment strategies, allowing us to adapt to our evolving lifestyle preferences, inflation rates, and expected returns. Each journey to financial independence is distinct, and while these figures provide a guideline, they are adaptable to individual circumstances.
In the previous year, reaching a net worth of over $1 million was a significant achievement for us. However, the generated passive income fell short of supporting our desired level of continuous travel. Although LeanFI could facilitate a nomadic lifestyle with strategies like house-sitting, it wasn’t in line with our broader aspirations.
Currently, we are transitioning from SemiFI to FullFI, incorporating work, business endeavours, and extensive travel into our lifestyle. The journey of life is full of unexpected lessons and opportunities for growth, and we may even consider pursuing FatFI as our business and investments evolve.
We encourage you to explore these financial independence stages and assess which align best with your personal and financial aspirations. Sharing your experiences and progress not only inspires us but also enriches the broader community.
We’d love to hear about your journey towards financial independence. What milestones have you reached? What challenges have you faced? Your stories are a source of inspiration, and we eagerly look forward to celebrating your successes with you.
