It’s always fun to read articles about people who are financially independent and get into some of the nitty-gritty details to understand how they got there and how financially independent they are (FI is indeed a rainbow of possibilities).
For those that want to go strait to the article, go here: http://money.com/money/5190396/this-39-year-old-saves-75-of-every-paycheck-and-is-almost-ready-to-retire-heres-how-she-does-it/
To get the full picture, here’s her recent post with a net worth update: https://missmazuma.com/2019/07/12/in-case-you-missed-it-im-financially-independent/
Here’s a quick summary of her net worth:
- 445k in assets
- ~223k in 401k (based on her description)
- ~223k in non-retirement accounts (assuming the rest is not in anything like a roth)
- 100k condo, with a cost basis of 64k (currently renting, so getting income from that – netting 700 per month)
- 36k caboose
Here’s what that portfolio gives her monthly:
- ~$1.5k assuming her cash assets provide a 7% growth rate withdrawn at a rate of 4%
- ~$700 net from renting condo
So all-in-all, if she withdraws at a rate of 4% and continues getting rental income, her monthly net is about $2.2k. That, on top of her calculated expenses of $2k per month, she’s at the sweet spot of being able to bring in more than what she spends currently. I would say that at the very least puts her into some category of FI. Which one? Well, although she self-describes herself as full FI, I would definitely not put her in that category. She’s currently working which gives her health insurance, a huge expense that may break the bank when added to her monthly expenses. That doesn’t make what she’s accomplished worth any less, but I do believe it’s premature to consider herself fully FI (she describes working the next 4 years as simply adding a safety buffer – but it’s needed to be able to weather stuff like needing to buy health insurance).
Another critique I would have of her calculations, albeit small, is the 4% withdrawal rate. For someone retiring extremely early, that’s a pretty big withdrawal rate that makes a long retirement less likely to work (safe withdrawal rates typically do things like look at a 30 year horizon – but retiring early lengthens that). Then again, there’s always the possibility of going back into the workforce if money is going to run out, so it’s not a deal breaker for being FI, just a risk.
Nevertheless, it’s impressive how she’s focused so hard on these goals and has got so close to financial independence. How has she done it so far?
- Saves 75% of her $75,000 salary per year
- Additional income from side hustles selling refurbished furniture and various house and dog sitting chores
- Lives on $20k a year (so $1.7k a month), pretty frugal
- Owns a studio condo and rents it out with a net profit
- No children
- Trimmed food costs (e.g. switching grocery stores, finding lower priced products that still fulfilled needs – like going from bottled to boxed wine)
- Increased income by working more (compensation as a flight attendant is by actual flight hours)
- Low-cost hobbies, like hiking
An important thing to note is that she recognized you can go too far in the direction of spending no money and that you have to enjoy life. Good for her on recognizing that!
You can find here blog here, as Miss Mazuma: https://missmazuma.com/