The Sprint to FI

The Big Daddy of Milestones

Today we hit our end of year target of $1M.  Yes, I thought I would lead with that. No fancy intro, just that.

I set this target back at the beginning of 2021, when I had hoped that the market would return and we could, with a lot of savings reach that $1M mark.  Well, the market and our savings seemed to have exceeded my expectations, and here we are with a net worth of $1M between us, already.

Compound Interest

I want to thank the power of compound interest.  While Cat and I have been saving as much as we can, compound interest has also made a considerable contribution to the overall balance of our retirement portfolios. We all know in theory how compound interest works, but to see it in action; its a little hard to believe sometimes.  Both Cat and I look at the figures and find it hard to equate where we are now with where we were 10 years ago, but here we are.

So how did I calculate our net worth and end up with this figure?  I took the value of our retirement savings, our investment accounts, checking and cash, and added that together.  Then I subtracted our debts; less than $1000 We carry no debt other than monthly operating costs that we use credit cards for.  In turn we accumulate points for travel.  That net worth number now equates to roughly $1.002M.  I did not include the value of our paid of car. It is an asset but it is a depreciating asset, and I see no point in including it.  It’s current value is about $20k.

Do I feel different?

No, and that is the interesting thing.  We don’t feel any different at all, and I think that is a good thing.  Are we happy? Sure we are.  We realize that these assets can afford us a modest lifestyle should we choose to stop working.  Using the 4% rule, $1m will provide about $40,000 per year. That is enough for a reasonable apartment in a low cost of living area, all our bills paid and decent food to keep body and soul together.

There is not the sudden euphoria that you see with competition winners and I think this is because we haven’t won.  This is just an arbitrary milestone on a journey and sometimes that journey is hard.  It’s like looking down the hill you have just climbed from the top of that hill; there is the satisfaction in having your hard work yield a result, and that result (the view) is fantastic, but you are too tired to jump about and shout!

What next for us

Next is we keep on keeping on.  This milestone, while significant is not the end. We still have a couple of years left to save and our overall target for FIRE is $1.2-1.3M.  This means we have another quarter of a million to go, most of which is going to be contributed by compound interest.  This does not mean we will be slacking off on the savings. Quite the contrary I suspect.  There are some things that we want to do, and some things we may have to do which might mean us retiring slightly earlier than we planned, so our savings will remain constant, if not increase a little.  But what ever happens, we have the security of a basic income from our retirement funds, and I can’t tell you how good that feels.

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