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Friday, 18 August 2017

Can you retire yet?

Financial independence is a wonderful dream. At the start it's overwhelmingly exciting to realise that you don't have to work until you're old and grey. You start cutting costs left right and centre and see your bank balance sky rocket. You dabble in investing and start to understand annual returns, dividend reinvestments and rental statements. You automate your finances and confirm you're on track to freedom! 

And then the waiting begins...

I discovered this concept of early retirement in 2014. In that year I opened a RateSetter account and started investing in peer-to-peer lending, as well as buying my first home. In 2015 I opened a Vanguard account. In 2016 I opened an Acorns account. In 2017 I'm trying to buy another investment property.

In the last 3 years my net worth has more than tripled. My RatesSetter account alone pays almost $100 a month. My Vanguard account is returning the expected 7% per annum. Last year I pulled in more than $10,000 in passive income (not counting the rent Mr. FIRE pays to live here). 

Despite all this, the road to financial independence feels like watching paint dry.

Thankfully, I'm not the only one on this journey. Turns out a lot of people have gotten bored on the path to financial independence, and built a variety of tools to answer the question - Are we there yet?


Let's start with the classics. One of the most widely shared calculators is Networthify's "When can I retire?" calculator. It super simple and super friendly to use. Simply plug in how much you earn, how much you spend and how much you save. You can actually get away with only plugging in two values and it will work the other one out for you - neat.

Then add in your portfolio value. This is your net worth, but don't include the equity in your own home. You can't eat the equity in your home (which is why I recommend investing instead of paying down your mortgage) so don't include it in these calculations.

If you earn $40,000 a year and spend $20,000 your chart will look like this:

This tool focuses on the power of increasing your savings rate. If you earn $100,000 and still only save 50% of your income, your time to retirement will be exactly the same. But if you can earn $100,000 a year, while maintaining a frugal $20,000 a year lifestyle, you can retire so much sooner.

Check it out. Start by plugging in your own numbers to see how far away your retirement is. Then tweak your spending and saving to see how much a little change can have a big impact. 

Mad Fientist Laboratory

A much fancier one to play with is the MadFientist Laboratory. You can plug in you spending, saving and net worth each month and the FiLab will spit out a wonderful chart, plus some key dates.

Unfortunately the Lab doesn't play well with investment properties. For example, my property makes a bit over $15,000 a year in rent, but has almost the same amount of expenses. I have equity in the property which contributes to my networth, but that doesn't directly lead to income. 

I could update the lab with my only my stocks and peer to peer lending, but that wouldn't be the full picture either, so I take the 12 years to FI with a grain of salt.

If you didn't have investment properties, I think the FI Lab would be super accurate. Either way it's great fun to play around with - I've been keeping mine updated for almost three years! You do need to sign up, but that's just so your information can be saved so you can come back to it. I've never paid a cent, or received any dodgy marketing emails - this one is safe.

Bayalis calendar

Bayalis Is The Answer supplies us with a calendar on the countdown to financial independence. When the fireworks start exploding on new years eve you're free! You can tell your boss where to stick it, spend lazy Mondays at the beach and hang out with your pets.

The FIRE Calendar isn't complicated, but it does give you the opportunity to triumphantly shout "Winter is Coming!". Simply plug in your current portfolio value, and your target number and bask in the results.

Simple! You can also plug in some rewards for yourself. Once you pass a certain day on the FIRE calendar, pat yourself on the back.

The Earth Awaits

This isn't technically a retirement calculator, but it's great fun on a Friday when you're just praying for the weekend to start. Take your current portfolio and divide it by 25. This is how much you get per annum if you quit working right now. Imagine you had a terrible day at work, so you sell everything, take your 4% returns on your investments and vow to never work again. According to the Trinity Study that 4% withdrawal rate will last almost indefinitely in most cases (but not all!).

Head over to The Earth Awaits with your new passive income and see where you could live. Plug in your monthly budget, family size and lifestyle, and see what you can afford.

If you're willing to live a 'lean' lifestyle in a one bedroom apartment there are 93 places you could live for under $1,000AUD a month. If you're interested in living in Madurai, you could do it for only $406.09. That's only $122,000 invested.

What can you afford if you quit right now

How long could you live if you retired right now? I built a nice basic calculator to tell you just that. Assuming a consistent return, and a consistent spend with just a couple of numbers you can see how long your portfolio would last. Check it out here - LadyFIRE's Quit Tomorrow Calculator. You'll need to hit the 'File' button and save a copy before you can start playing with the numbers.

Of course, you might not use this number to quit tomorrow and retire early. Maybe this is what you need to start that business you've always dreamed of. While I'm chasing Early Retirement, knowing that I could easily go ten years without working is overwhelmingly comforting.

This calculator maxes out after 125 years of calculations - medical science is great but I doubt I'm going to make it past 150!

Have a poke around at the calculators above and see how you're doing. Is Winter Coming? Will your portfolio get you through the next decade? Are you moving to Brazil? 


  1. I can't remember if you have published the numbers, but I'm curious to know which ratesetter lending market are you in?

    To be honest, I've never used any calculators to see when I can retire, mainly because I don't plan on retiring ever! Haha. Personally, I'm more FI than RE, tho I think I will still go have a play around with some of them to see what they tell me.

    1. All in the five year market :) I don't plan on taking that money out - I consider it buying an income stream and the five year market has the best rate of return.

  2. I can retire till Thursday....does that count? Ha ha - a very interesting post - I do struggle with the boredom of investing and watching growth. Writing about it helps.

    1. Woo! Three days! Gotta start somewhere.

      I find my writing focuses on my current life obsession - so be prepared for a lot of posts about 'are we there yet' and food. I love food.


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