As the title states, If all goes according to plan, I will be financially independent by the end of 2022. This means that I will only engage in work or employment if I want to. We need to pause a moment to clarify. This doesn’t mean that I am going to retire and sip margaritas on a beach. It means that I am free to direct my energy and time into whatever I want without need or worry about money. There are three central tenets and assumptions to this core financial independence thesis that I will list below.
- My current yearly monetary consumption rate is 40 thousand dollars per year.
- This includes rent in my luxury apartment, going out to eat, my Netflix subscription, haircuts, travel, you name it. This is the total yearly cost of my comfortable life and my investments must pay this amount inflation adjusted.
- Inflation is assumed to be 3% per year.
- The stock market return is assumed to be 7% per year. The historical average is 10% but I am using 7% to sandbag.
Given the points listed above, in order to sustain my life, I need my portfolio to appreciate by roughly 70 thousand per year. This would provide forty thousand to cover living expenses and 30 thousand to keep pace with inflation.
If we assume a modest 7% growth rate for the stock market, this means that my investment account must be at least 1 million dollars. As of 2019, my investing accounts stand at 618 thousand dollars. My yearly savings rate is 80 thousand dollars and if the market appreciates by 7% compounded yearly, at the end of 2022 I will have just over 1 million dollars.
It’s not completely certain that things will work out. The market could collapse or I could lose my job or some random tragedy could befall my life. But I think it would be fun and possibly informative to other people if I tracked my progress and shared whatever success or failures I meet along the way.
The chart below is my projected account growth at various investing account growth rates. The end of 2022 is when I cross the magic million dollar threshold at my most pessimistic account growth rate. The “year off” and “year off 2” labels represent a hypothetical scenario where I am no longer employed and contributing to the investing account but also not withdrawing from it. During this time, I’d be able to live comfortably off of the money I have saved in my Korean bank.
I plan on keeping track of monthly progress as well as share my account positions and basic investing strategy. I’m going to put it all out there to see how this great big experiment unfolds.