FUCK the 4 % rule – My Detailed Plan For How I Will Become Financial Independent In Only 5 Years!

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This post was awarded “Blog Post Of The Month – April 2019”

Blog Post of the Month


At the moment I got aprox. 160.000 $ USD invested in index funds, while my net worth is aprox. 170.000 $ USD.

I declare my self finanicial independent by the time I got 600.000 $ USD in net worth.

There is nothing more in life I want than to have control over my time.

To decide what I will use my precious life energy on.

Right now I work 7 1/2 hours + 1 1/2 hours commute every day. I also need to get ready for work, decompress after work and also plan a little for the next day.

In total I use 10 hours of life energy every day for work related tasks. That’s 14 hours left of the day.

I also sleep aprox. 8 hours.

Now I only have 6 hours left of my day.

These 6 hours is my life. In these hours I’m supposed to make dinner, meet family/friends, go to the gym, read books, write on this blog etc.

For me, this is not enough. I dream of using my 10 work hours to things I actually want to spend time on.

Imagine all the business ideas I could launch if I actually put in some serious effort?

That’s the reason I want to be financial independent.

In the following I will break down my 5 year plan in detail (with numbers), to motivate my self, and hopefully others.

The plan is using a lot of assumptions, and the fact that life is dynamic. As a project manager I know that a plan has to be updated on a regular basis. The plan will never turn out exactly like I planned it.

But remember that nothing is impossible.

It’s only impossible if you believe it is!


Year 1, April 2019 – March 2020 | Expected net worth increase: +74k | New NW: 244k

Work situation and current salary

At the moment my salary is 76.000 USD $. From 1th of May I expect it to increase aprox. 5 – 6 %. So most of this period I will actually earn 80.000 USD $.

I work as a project manager, and recently I was chosen to attend the internal leadership program within my company. This program will last until november 2019. I’m also taking 60 ECTS in leadership on the university, so my plan for now is to start searching for new jobs after the summer.

Life is floating. Maybe there will be a new job role for me at my current company. Maybe I will go somewhere else.

But what I do know is that it is highly unlikely that my salary will decrease in the future.

Finances

-My investments in index funds are expected to increase from 160.000 $ to 215.000 $ (assumption: 7 % increase and investing 3500 $ every month).

-My net worth is expected to increase 74.275 $ from 170.000 $ to 244.275 $.
Assumptions:

  • Index funds increases with 55 k, minus aprox. 10k leverage = 45.000 $
  • Apartment increases with 5 %. My share is: 257.500 x 0,05 = 12.875 $
  • Mortgage down payment: 4800 $
  • Pension increase (16 % of current salary, 14 % covered by employer): 12.700 $
  • Student loan (not paying on this at the moment, 2 % interest rate): 55.000 x 0,02 = -1100 $
    SUM net worth increase: 74.275 $

Year 2, April 2020 – March 2021 | Expected net worth increase: +79k | New NW: 323k

Work situation, current salary and life situation

Hopefully I got a leadership position by this time. I think I can expect between 90 – 100 k $ in a middle manager position.

We’ll see. Maybe I find out that I hate to be a leader when I attend the leadership program at my current company.

Therefore I don’t use higher numbers in my investing assumptions below. For all the 5 years I assume I’m investing 3500 $ with a small leverage amount. If it’s possible I will invest higher sums this year / or even pay down more on my mortgage.

We’re also planning to have a baby in this period. That costs money, but will be totally worth it! There is also a probability that I would want to work 80 % in this period to spend more time with the little one.

That means less money and delayed FI, but isn’t the point with FI to have more time anyway?

Finances

-My investments in index funds are expected to increase from 215.000 $ to 274.000 $ (assumption: 7 % increase and investing 3500 $ every month).

-My net worth is expected to increase 78.912 $ from 244.275 $ to 323.187 $.
Assumptions:

  • Index funds increases with 59 k, minus aprox. 10k leverage = 49.000 $
  • Apartment increases with 5 %. My share is: 270.375 x 0,05 = 13.515 $
  • Mortgage down payment: 4800 $
  • Pension increase (16 % of current salary, 14 % covered by employer): 13.000 $
  • Student loan (not paying on this at the moment, 2 % interest rate): 56.100 x 0,025 = -1403 $
    SUM net worth increase: 78.912 $

Year 3, April 2021 – March 2022| Expected net worth increase: +84k | New NW: 407k

Current salary and life situation

It’s getting harder and harder to describe what I want out of my life situation as we move further into the future. At this time our first child is probably around 1 year old, and I have the right to paid permition from work for about a half year. I am really looking forward to his period!

Maybe this time will give me a feeling of how it is to be FI?

Hopefully my salary will have increased in this period as well. Somewhere around 100 k $ should be realistic.

Finances

-My investments in index funds are expected to increase from 274.000 $ to 337.000 $ (assumption: 7 % increase and investing 3500 $ every month).

-My net worth is expected to increase 84.270 $ from 323.187 $ to 407.457 $.
Assumptions:

  • Index funds increases with 63 k, minus aprox. 10k leverage = 53.000 $
  • Apartment increases with 5 %. My share is: 283.890 x 0,05 = 14.195 $
  • Mortgage down payment: 4800 $
  • Pension increase (16 % of current salary, 14 % covered by employer): 14.000 $
  • Student loan (not paying on this at the moment, 2 % interest rate): 57.500 x 0,03 = -1725 $
    SUM net worth increase: 84.270 $

Year 4, April 2022 – March 2023| Expected net worth increase: +91k | New NW: 498k

Finances

-My investments in index funds are expected to increase from 337.000 $ to 405.000 $ (assumption: 7 % increase and investing 3500 $ every month).

-My net worth is expected to increase 90.928 $ from 407.457 $ to 498.385 $.
Assumptions:

  • Index funds increases with 68 k, minus aprox. 10k leverage = 58.000 $
  • Apartment increases with 5 %. My share is: 298.085 x 0,05 = 14.905 $
  • Mortgage down payment: 4800 $
  • Pension increase (16 % of current salary, 14 % covered by employer): 15.000 $
  • Student loan (not paying on this at the moment, 2 % interest rate): 59.225 x 0,03 = -1777 $
    SUM net worth increase: 90.928 $

Year 5, April 2023 – March 2024 | Expected net worth increase: +97k | New NW: 595k

Finances

-My investments in index funds are expected to increase from 405.000 $ to 477.651 $ (assumption: 7 % increase and investing 3500 $ every month).

-My net worth is expected to increase 96.815 $ from 498.385 $ to 595.200 $.
Assumptions:

  • Index funds increases with 72,5 k, minus aprox. 10k leverage = 62.500 $
  • Apartment increases with 5 %. My share is: 312.990 x 0,05 = 15.650 $
  • Mortgage down payment: 4800 $
  • Pension increase (16 % of current salary, 14 % covered by employer): 16.000 $
  • Student loan (not paying on this at the moment, 2 % interest rate): 61.002 x 0,035 = -2135 $
    SUM net worth increase: 96.815 $

This excersise really FIRE’d me up!

Wow, can I retire in only 5 years?!

My net worth is expected to be 595.000 $ in march 2024, while my investments in index funds will be “only” 477.000 $, so I actually don’t qualify for withdrawing 2000 $ with the 4 % rule. According to the 4 % rule I can withdraw 1590 $ / month (477.000/25/12 = 1590 $).

Actually the 5 % rule is more of a fit for me with 477k $ invested (477.000/25/12) = 1987,5 $.

Should I retire completely in 5 years? FUCK the 4 %-rule

This is a tough question. I definitely can, and I am not afraid that I won’t earn any money ever again.

Many people would probably say that my nest egg isn’t big enough. And you’re right, if I would just chill on the beach for the rest of my life I would be empty after some decades.

That’s absolutely not my idea of retirement. I want to start explore side-hustles/business ideas that I have, try lower paid part time work (for the fun of it), write on this blog or maybe other blogs, try writing a book etc.

This will definitely bring some money, so why should I delay retirement for more years if it’s not necessary?

I want to live my life too.

A common trait for people in the FIRE-community is that we are extremely good at grinding. We mange to save a lot, spend little and delay gratification.

So why shouldn’t I handle to FIRE on a little less portfolio than I planned for?

I am flexible.

If a major market crash would occur and my portfolio is totally depleted, I can always go back to work.

Maybe my business ideas do miserably and I have go begging for my job back. I agree, that doesn’t sound like fun.

But is that really what I am afraid of?

Should I stay in my cubicle because I am afraid I might fail, and then end up in a cubicle?

But that’s where I already am!

If I stay longer in my corporate job I will eventually become a millionaire, but is it worth it? Staying there for so many years?

If I rather start something for myself there is an unlimited upside. I can potentially earn much more. And at the same time I can do work that I love.

Isn’t that worth the risk?

When I think of the bad things, that creates fear. That’s why I am afraid. Instead, I should think of the good things that could happen.

Imagine myself succeeding. Imagine myself happy. That creates excitement, energy and motivation.

And that’s how I always should be thinking, because if I pursue something real, nothing bad is going to happen. Life is not going to get worse. It only gets better.

It’s safe to stay in your job. It’s easy. You can’t fail there. Rather can you succeed there. Not ultimate success at least. Life goes by and everything stays the same. You complain a lot, but that’s life you say to yourself.

But one day, and I can guarantee you this day will come that you have regrets about playing it safe. For some this time will come in their 20’s, others in their 30/40’s and even some in their 50/60’s.

I am aware of it now.

I will not play this safe game forever.

Life is too short for not taking chances.

So FUCK the 4 % rule!

At the end of march 2024 I will be financial independent.

This is in exactly 5 years (1827 days).

I will be 36 years old, and my whole life is still ahead of me.

Sitting at my senior home at 80 thinking, man, what if I had just tried to follow my dreams when I was young?

That’s terrifying. We’re all going to die anyway, why not take a chance?


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48 Replies to “FUCK the 4 % rule – My Detailed Plan For How I Will Become Financial Independent In Only 5 Years!”

  1. It’s hard to imagine not earning anything in FIRE. Especially if you have plans to start a company of any kind. Someone will pay you at least _something_ if you’re willing to give up a bit of equity and your idea is any good.

    So I imagine 4% is way too strict in your case.

    1. route2fi says: Reply

      Thanks, Eelis!

  2. This plan is impressive indeed! I wish I had a bit more of stability and confidence about my future to somehow develop some sort of a plan. Your plan is full of assumptions that no one knows if they will materialise (I am talking about the 7% market annual increase), but as you introduce in the beginning, initial plans need to be updated and revised regularly, as most of the times they don’t follow our assumptions (Murphy’s law), but we need to start planning somehow, don’t we? Otherwise we just procrastinate with the excuse of not knowing sth for certain.

    I’ve just found out that I’m bl**y procrastinating? Got some homework to do I thing.

    I wish you all the best with your plan, it’s encouraging! I will follow it closely 😉

    1. route2fi says: Reply

      Thank you so much, Tony!
      There is so many factors here, so it is impossible to plan it out perfectly. But is is motivating to make a “realistic” plan. Will you release a plan? Or do you think it depends too much on your living situation?

      You know I follow you closely too 😉

  3. I think it depends too much on my living situation and I don’t know whether it’s worth to spend the time tracing a plan. On the contrary, having a very unrealistic plan could help me to clear my mind and learn something new. I’ll think about it for a while and make a decision.

    1. route2fi says: Reply

      But amigo, it doesn’t take more than some hours making a plan..and even if the plan fails, it will make you dream big! And you will start believeing in that plan. And remember that the universe gives you what you believe in 😉

      1. So true!, but I am still not sure if I want to make a plan prior Brexit. It’s harder that you may think for us (Europeans living in the UK) to actually make any sort of plan. We are in a “hold on” consuming position, and currently living in that situation, I find it challenging to make a FI plan when things can change dramatically anytime. But, what I think I can do is to calculate how much “fired” or perhaps a main plan and a back up plan?

        1. route2fi says: Reply

          You’re right, and I totally understand your situation! It’s not easy to plan for something in a hold position.
          Yes, I think you should calculate how far away you are to motivate yourself 😉 A main plan and a backup plan may also work 😀

  4. mikebeatty1 says: Reply

    Love love love this!! Fuck the 4%!! I can relate so much to this it’s unreal. My wife and I are thinking of having kids soon (if we can, touch wood). I’m actually taking a year off work next year (we have a years savings, property investments going on and growing the online business)

    I totally get what you’re saying about potentially making more money AND doing something you love.

    Plus I just feel like I can add more value to more people by showing them it’s possible.

    Thank so much for sharing, I’m lookong forward to how this all goes!

    Take care

    1. route2fi says: Reply

      Thanks, Mike! Which SWR (safe withdrawal rate) do you rely on?
      That’s so true!
      Think how beautiful the world would be if we all could just work with exactly what we wanted to work on!

      Wow, kids soon, that’s awesome! How will you spend your next year when you are off from work?
      Where are you guys on your FI journey?

      Cheers!

  5. You are correct. Life changes and the plan will change to fit. You May also change as the years go by. Five years is a good amount of time to plan and calculate. If there are any problems with this plan, you should be able to see them within five years. The important thing is that you are setting yourself up now for success in five years. Even if the plan changes, you will have excellent options to work with.

  6. route2fi says: Reply

    Thank you, Perpetual Money MAchine! 😀
    Do you think my plan is solid enough? And if you were me, would you quit after five years? Or stay longer in the game?

    1. It s nice of you to ask my opinion. And I do stress that it’s just an opinion. In fact, I would say that my opinion is definitely on the conservative, risk-averse side of the when to retire question scale. With that said, I can definitely see that I and my opinions about things have changed as I have aged. Mostly, when I look back, I am glad that I was not too quick to react to situations. For example, I went through a very tough 6-year period at work. I was tempted to walk out many times. Things eventually did get worked out, and I am glad that I stayed. Of course, one could follow that line of reasoning to die in their cubicle. You have to find the right balance between accumulating enough wealth and enjoying your time and youth. I think you have the right idea to set a date and work toward that goal. That is something I have mostly failed to do. As you get closer to your date, you will be able to compare your plans to unfolding reality.

      So, how does my personal experience compare to yours? At 25, I was spending less than $20k. At 26, I moved from apartment life to suburban home ownership life and and a cash burn around $30k to support the mortgage. By 32, I paid off the house, but had 2 kids. I was still spending around $25k, but kids do get more expensive as they get older. I have 3 kids now, including 2 teenagers with sports, dance lessons, and other activities. My burn rate is about $40k now.

      I once felt like I could be completely happy at $20k, but I don’t think that is the lifestyle I want anymore – at least not until the kids are gone. Most people would consider Mister Money Mustache’s lifestyle at $25k for 3 people be be quite lean. On a per-person basis, my family is running as lean as his. A lesser lifestyle would be more effort/sacrifice than I’m willing to make.

      So, I’m glad I didn’t quit working when I had a $20k SWR locked in. I don’t ever want to have to go back to work, and that’s the only way I would feel secure about a SWR higher than 4%. I guess I’d rather work an extra year or 2 now than execute a plan that includes a fair likelihood that I will have to go back for a couple of years or even more. There are 2 important assumptions here – 1. I will not be able to earn more per year after retiring than I can now. I don’t want to Barista FIRE. 2. I’m a little tied down by my kids. Even if I didn’t work, my freedom to travel, etc. is limited. This makes me a little less eager to leave work.

      Kind of a ramble, but I hope that helps.

  7. Slow and steady wins the race.

    1. route2fi says: Reply

      100 % correct!

  8. Solid plan all the way! Very inspiring post as well.
    Thank you!

    1. route2fi says: Reply

      Thank you! Where are you on your FI journey? Isn’t France one of the hardest countries to become FI?

  9. Hi Route2FI
    By the sounds of it you don’t want to retire at all. Instead, you just don’t want to be forced to work for money. I think that is the common theme among most of the FIRE group. Financially Independent Doing Whatever I Want. Unfortunately, FIDWHIW doesn’t have the same ring to it. Keep up the pace!
    Matt

    1. route2fi says: Reply

      Well, I want to retire from my day job. But I wont be sitting at the beach all day. I want to try new career oppurtunities that I don’t need to earn a wage from 😀
      Thanks, mate! I wish you a great weekend!

  10. I retired slightly early and now just side gig for fun. But only one day a week. While I work when and where I want, the thing is, running a business for yourself is harder than working for others. It just is. That’s why I limit how much I do, being full time self employed really wouldn’t feel much different than working for someone else, in fact it might feel worse. Its the fact I work less and have no need for money that makes retired life fun, not the part where you work for yourself, that’s not a material difference in itself to me. Work is still work, and while I mostly enjoy mine and need the discipline it imposes, it still feels like work.

    1. route2fi says: Reply

      Thanks for reaching out, Steveark!
      What kind of sidework are you doing?
      That’s exactly what I think! You have to be FI to really enjoy work, because a job is still a job! When did you retire btw? No regrets? 🤗

  11. […] feel lucky to say that I only got five years left before I quit the rat race if I choose to live in […]

  12. Awesome outline showing that I shouldn’t be so afraid of calling it quits before hitting 4%. I have considered this for years, since I know with my workaholic personality wI will find my self into something that bring in money during “early retirement”. That changes the entire equation!

    1. route2fi says: Reply

      Thanks, Penny Pincing Ninja! 😀 When do you think you will quit yourself? 😀 Which safe withdrawal rate are you aiming for? 5, 6, 7 % maybe?

      1. 3 years from now I estimate I should be around a 5% area barring any major setbacks. Of course 3 years feels like forever so I may pull the plug sooner and settle for a 6-7% withdrawal rate and gradually find my way into something I enjoy doing that I can do on my terms.

        1. route2fi says: Reply

          That’s really impressive! 3 years may feel like forever, but you’re soon there. How much will the total nest egg be with 6-7%? I say go for it 😃 You will always earn money some way!

  13. That is a good plan. Just talking from personal history here to provide some real life experience.

    I three my job when I reached US 670k Networth. Initially the plan was to just recouperate, dive, get fit, enjoy family time.

    I invested in real estate at the best possible time as it turned out (part luck/ part educated Guess). The real estate is worth US950k now and I have some equities as well which is nice but I cannot withdraw as their are tight in till my retirement age. I manage to pull some US40k a year net (pure profit) from my real estate holdings.

    I also plan children in a high cost country (Singapore). I have now over two years of relaxation time behind me and am ready to go back for a few more years. It will be relaxed this time around. If not I change jobs. Easy. I think it ‘a necessary to grow the nest egg further if you expand family (at least in my case and knowing myself).

    So initially I tested it I can FIRE, then I realised I can easily, then I decided to have kids and that it’s not enough, but I took time off.

    You are right, plans change, they will for you too I am sure. But take the time off, live a little, have fun. Performers like you always can come back if things go South, just don’t burn bridges.

    All the best, excellent plan, enjoy the ride!

    1. route2fi says: Reply

      Thank you so much, Financial Gladiator! When you quit with $670.000, how much was your plan to spend every year then? Did you plan on using the 4% rule?
      What kind of work are you taking on now? Will it be full time?

      Thanks for motivating me! I will do this 😀 I will be FI in 4 1/2 years. And as you say, if it don’t work out or I don’t like to be retired, I can always go back..

  14. FellowNorwegian says: Reply

    Nice site. My plan has a lot in common with yours, but although my net worth is now around 450k I certainly can’t retire in just 1-3 years. This is due to the fact that people need somewhere to live, which binds up a lot of the capital which can’t just be liquidated or generate returns. So my question is how are you planning on solving this?
    I also don’t think your 5% yearly housing price increase is realistic by the way, given the way the market has gone for the last couple of years.

    1. route2fi says: Reply

      Thank You!
      Do you have a blog FellowNorwegian?
      I see, is most of your capital in the mortgage/house? Can you refinance your mortgage and put it in more liquid investments? What is your FIRE-number btw?
      Please tell me more about your plan 🙂 Thanks for the perspective!

  15. FellowNorwegian says: Reply

    No blog as of now, but I’m thinking about it 🙂
    3/4 of the capital is tied down in the house, but the interest on the mortgage is still high enough per month to kill my incentive for refinancing.

    There’s no FIRE-number since I am a bit older than you (early 40s). Because the pensions start flowing at 60 I don’t think about the 4% rule or anything like that, I just need enough capital to survive until then and make sure my pensions and nest egg covers the expenses. This makes pensions extremely important for my calculations, too bad they are so hard to predict.

    I’m probably going to need around $750k, and that will still require some downsizing on the house and a little side income. (Yeah, the expenses are on the high side..)
    I can already feel the “one more year” syndrome is going to be a battle.
    The goal of my “retirement” will be to work on creative projects like music, photography and video game development and hopefully get at least some income that way.
    So not exactly a barista FIRE but more of a creative artist FIRE 🙂

    1. route2fi says: Reply

      Okey. Hopefully you join us bloggers 😀 What is your interest rate on the mortgage?

      Ah, I see! How far are you from $750k now? Important to downsize to reach FIRE!

      Really exciting plans you got! What do you work with normally? Would love to hear more from you 🙂

  16. We have a common belief. Happy to see someone admit that FIRE doesn’t necessarily mean never earning money doing something else after ditching the rat race. I left my career with a higher than 4% withdrawal rate to live on and also had some awesome gigs along the way where I just reinvested all earnings. I will always be open to opportunities that align with my interests.

    1. route2fi says: Reply

      Hey, Tommy!
      Nice to hear from you.
      Would love to hear your story. What career where you in and how much money did you leave with?
      What are you doing now? Would love to read your story! Always eager to learn from people like you!

  17. Great plan! Ambitious but attainable I think. There’s an increasing realisation that you don’t need to be fully FI before pulling the plug if you have skills that can generate income after FIRE. With the Internet its so much easier for people to generate some money without working for somebody else.

    1. route2fi says: Reply

      Thank you!!
      What is your plan btw? When will you pull the plug?

  18. […] Route2Fi “FUCK the 4 % rule – My Detailed Plan For How I Will Become Financial Independent In Only 5 Yea…“ […]

    1. The goal is to FIRE before our eldest goes to primary school. This will be in around 3 years time.

      1. route2fi says: Reply

        Sounds awesome, man!!

  19. Statistically, a solid recession is due in the next few years. We are already in the longest bull run in a long time. At least 1 year of low growth with at least 6 months of contraction are due. 7% a year is unlikely, and if it does, then the contraction will occur shortly after that. My take would be to set your number and FIRE after the next recession ends. That may not impact your timeline at all, but my suggestion is to use those conditions as triggers as opposed to a hard date. I think hard dates are only safe with a FatFIRE.

    1. route2fi says: Reply

      Thanks for your insight! I’ll definitely recalculate lots of times along the way 🙏

  20. Sukhi Longia says: Reply

    I heard a radio show day before and the guest speaker said a one liner and it was, “The future is less predictable”. It is a show that talk only about FI and there is another FI that will get us our FI. Its “Financial Intelligence”. Nice blog. Nice plan. I would still keep my mind still open to what’s really that you can do to control your time and money. Having 100 percent control on your time and money is being totally financially independent. Handing over the hard earned money to someone else (stock market, equity) is loosing the control.

    The formula to FI is to build a business for an excessive cash-flow so that it can be invested on a regular basis that too to generate Cashflow and Not equity alone. You are smart and you are intelligent. You can achieve a lot more by being active.

  21. […] You can find all the calculations on how I’m going to retire in only 5 years in my detailed post here. […]

  22. “If I rather start something for myself there is an unlimited upside”.

    This. This! This!!!

    I’ve read this article multiple times the last couple months and always come back to this line for the motivation.

    Corporate is safe.

    Your own business/hustle – unlimited potential (and more fun)

    Cheers,

    -Chris

    1. route2fi says: Reply

      Thanks, mate 😀

  23. Hi Route2FI,
    Don’t you think that retiring on 600K is risky in relation to a market crash. I get that you can always go back to a corporate job. But if your net worth is cut in half and you have built some debt for a business development, is’nt 600K in the low end?
    Anyway, this is very motivational. There will be a long time till i get to your level of net worth.
    Best of luck the next five year 🙂

    1. route2fi says: Reply

      Thank you! I’m flexible..I can always go back and work more 🙂 Maybe I’ll start with a year off, and then we’ll see what happens? Maybe I find some online work I enjoy?

  24. […] free with P2P lending is my personal goal. Though many financial independence bloggers use the 4% rule or their own rules I have concluded that P2P lending would be the best fit for financial freedom […]

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