Episode 419: Want to Retire Early & Reach Financial Independence? Here’s the Tool That Helped Me Plan It

Jamila Souffrant 0:02

None of this could have went wrong, because betting on yourself in the way that I did it in, I felt like in a responsible way, by saving up enough money and having a backup plan, I felt like, even if this doesn't work in the way I would like it to, by the standard age, we'd still be okay. Seeing that, seeing those scenarios, made me feel a lot better about taking the leap 10

seconds. Welcome to the journey to launch podcast with your host Jamila Souffrant as a money expert who walks her talk she helps brave journeyers like you get out of debt, save, invest and build real wealth. Join her on the journey to launch, to financial freedom, 54321,

Jamila Souffrant 0:51

if you want the episode show notes for this episode, go to journey to launch.com or click the description of wherever you're listening to This episode in the show notes, you'll get the transcribed version of the conversation, the links that we mentioned and so much more. Also, whether you are an OG journeyer or brand new to the podcast, I've created a free jump start guide to help you on your financial freedom journey. It includes the top episodes to listen to, stages to go through to reach financial freedom, resources and so much more. You can go to journey to launch.com/jump start to get your guide right now. Okay, let's hop into the episode. Hey. Hey, journeyers, welcome to the journey to launch podcast. I am your host, Jamila Souffrant, and I'm so excited that you chose to press play on this episode, and you are joining me today, and I have some what I hope will be very beneficial and really get you excited about your financial independence journey, content and information for you. So I'm going to be sharing more about something called the Fire calculator. I call it fire calc for short, but it is a tool that I created years ago that really helped me be able to map out how I was going to reach financial independence. And I mean, really map out, like by numbers. And it was a tool I used to know and feel comfortable to quit my job. It is a tool that is usually baked in my program. So if you have joined any of my membership programs or any group coaching or coaching, you probably have heard and seen the fire Calc and I'm I've usually, it's usually contained within something that I've done because I've realized, or I felt like that, if I were just to give people the calculator or have it as a product by itself, that there's so much work that kind of goes into it, that I was afraid that people would not get the full benefit. But as I've been doing this now for years and doing programs, realizing that people love the content around the fire Calc, or all the inputs you need to get to be able to reach financial independence, which means working on mindset, understanding your income and expenses and all those things. But the thing that people come away with when they take my programs is the fire calc was the most powerful tool, or thing that has helped me, because it really allowed me to put in to play and see with my own eyes what could be done. And so I am doing something brand new, something I've never done before, and I am sharing the fire CALC tool as a standalone product that I'm offering you, and a class to help you go through and understand it, where I'll explain it live to you, to the public. So I wanted to record an episode all about the fire Calc and talk more about it, why it's so powerful, how I use it, how I've come to how it's come to evolve, and how it can be beneficial to you. And even if you don't take the next step and get the fire CALC tool for yourself. I believe this episode is going to be a game changer for you, but you'll hear more about the fire CALC tool and how you can get your hands on it and then join the live class as I talk in this episode. But if you want to just jump right in and go check it out, go to journey to launch.com/fire

calc that's journey to launch com slash fire f, i, r, e, Calc, CA, LC, and you'll see more. But before we get started, I do want to just give a disclaimer. I am not a financial advisor, and this podcast, and the content is informational and for educational purposes only, the fire CALC tool that you'll learn more about doesn't take into account taxes or tax planning, and it doesn't provide specific investment advice. It's a starting point and a way to map out your different scenarios and dream about what's possible for you, and so as always, you'd want to consult with a qualified financial professional before making any rash financial or just basic. Make financial decisions. If you have more questions. Now, let's get into the fire Calc. I want to tell you how it came to be, how I created it, and then we'll go into inputs and what is so powerful about this tool. So I remember, when I first found out about the fire movement, the financial independence retire, early movement, I was so drawn to it because essentially the concept of being able to be financially independent from a job from anyone other than yourself. So financial independence is this concept, this idea that you have reached a point where work becomes optional because you can live and survive and pay your expenses from your investments, so your retirement accounts, your taxable account, passive income, maybe you're working, maybe real estate, but essentially you don't have to work unless you want to. And I thought to myself, all right, how do I get to this point? And I was working in corporate America at the time and learning more about the concepts and the numbers and all the work that you need to take to get there. But what really stood out, or what I knew that you needed to know just to embark on the journey, was like how much you needed to have and how would you be able to get there. So how could one person, how could you say, I want to reach financial independence and put a timeline on it without knowing how much you needed to invest, over time, the amount of years it would take, and all these inputs, these numbers, and I realized that you can go online, you can type up calculators that kind of help you figure that out, like really basic calculators. And a lot of it was using future value calculations, which essentially just looked at the future of value of a number of an investment. So it took into account how much you'd have if you over time, invested in an account, in an investment account, but it assumed the same amount every year or every time period. And so with that, if you were someone who said, Okay, I've figured out I have $10,000 today, and I can invest over time, let's just say $1,000 a year. You know, I'm just giving you basics, and I can do this for 15 years. The future value calculation online, the calculator you can find would spit out a future value number. And from that, you'd be able to say, Okay, this is how much I'd have in 1015, years, if I invest consistently over time. And then you can see, well, is this the amount I need to become financially independent? Now that sounded good, but I was like, Wait, like, I feel like that's a great number to see, but it doesn't take into account life. Because life happens, you know, you there are so many things that happens where you may not be able to invest, most likely, the same amount over time, consistently, and things change. And so I sat down at work. Yes, I was at work, and because I worked in behind a desk and I used a lot of spreadsheets, that's the thing. I was picking up so many skills from my corporate job that helped me so much on my journey. This is where I talk about whatever you're doing now that you feel like it's a waste of time or you don't know how it's going to serve you, it is serving you. I'm telling you I feel for me. Being in corporate America, working with so many spreadsheets allowed me to understand how to manipulate and to craft spreadsheets that would help me figure out how to create this fire CALC tool. And so I wanted to create a tool that would be flexible, so that would not just limit me to putting in one amount over time or over certain periods that were the same amount each year or each month. I wanted to be able to take into account what I felt like would be life changes or things that would occur in my life, where maybe I would quit my job, which I did, and or take a break, or maybe I was paying off debt or wanted to buy something or spend more money, where I couldn't invest the same over time, and I took my time of a period of months and started to craft a tool. At first, it was in Excel. Then I announced in Google Sheets, this tool that allowed you as a user to put in inputs about yourself. And at the time, it was, for me, my age, my starting point of investments, and then over time, each year, how to model out how much I thought I could invest. And with that, I was able to see and claim all those years ago that I could reach financial independence in 70 years. And I was able to do that because I was able to create different scenarios using this tool. I had basic scenarios where, okay, if I don't change anything with our investments as a family, here's where we'll be in. 1015, 20 years, if we invest really aggressively, here's who we'll be and so on. And by the way, this same tool I remember very vividly is the same tool I came and showed my husband because I had been talking about the concept of financial independence. And he was, you know, he just was skeptical, as most people are when they're not in this world or have heard about it before, and I remember talking about it and him just saying, okay, that's fine. And when I was able to show him two different scenarios using my fire Calc, one scenario of, here's if we do nothing, here's if we continue to do what we're doing, so no changes. Here's what we'll have in whatever when we're 40, when we're 45 when we're 55 and so on. I was able to show him that in the same spreadsheet, and then contrast, if we make changes and we are aggressive for the next few years, here's how much we'll have in our investments. And I remember showing him that number and it being real to him, because before, it was all just concepts and me talking, but being able to show him the math and him not. He's not necessarily a math person. I mean, he's very smart, but he's not he just wanted, he needed to see the numbers and also me explain how I created the spreadsheet. He was so much more excited and on board, because I was able to show him something tangible. And so the fire calc was so powerful for me, because one, I was very proud of myself for creating it, but then it was able to guide me and allow me to dream in possibilities. So with the tool, year by year, it has your age, and then how much you can put in each year, I was able to visualize, okay, when I am at the time, when I am 40, and I think I'm going to be in this position in my life, or this stage and again, these are you can't really know for sure where you'll be in life, but I was able to forward think a bit and say, Okay, I might want to take a couple years to travel or I want to take a couple years to not work, which actually happened when I quit my job, I wanted to see how that impacted my financial independence plan. And so seeing that in real time was so helpful. So I remember when the idea of me quitting my job earlier than my seven year time limit came up, going into the tool and saying to myself, Okay, let's create some scenarios. I want to see what's going to happen to us. One okay, if we continue on and I just keep working, let me see this plan through that I said I wanted to do, which meant working for the next X amount of years, investing aggressively in my 401 k, which meant my husband could also invest aggressively in his retirement account. And if we did it for the next five, seven years, where would we be? Then I created a couple more scenarios, okay, but I have this idea now that I want to quit my job in the meantime, while I'm on the financial dependence journey, have my own business journey to launch, which is this, what does that look like. And so I modeled out a scenario where we weren't investing for a year or two because that money instead was going to build up into our fu funds that would cover our expenses while I quit. And then I modeled out a couple years where I was we weren't investing at all for the next couple years. So there was like a four or five year time period in the model that had zeros in investing. And then I thought, Okay, now what if journey to launch takes off and it does exceptionally well, and I can go back to investing aggressively in five years? What does that look like? And then I was able to model that out. I had another scenario where I said, Okay, what if it doesn't do exceptionally well. It's not making millions, but it's a decent living, and we can modestly invest what does that look like? I even remember modeling out. What if this doesn't work out at all and I have to go back to work? So I did all that, and at the end of it, yes, my timeline changed of how fast I could reach financial independence in the scenarios where I wasn't earning money and we stopped investing the fi number that we needed. It took a longer time to get there. And then, of course, in the scenarios where I assumed I'd be earning money and we'd be able to invest, we were getting to our fi number sometimes earlier than some other scenarios. And what I saw that allowed me to feel the space and the comfort level, and even though I was so uncomfortable to be able to quit, was that I saw that even at the standard age, even if all went quote, unquote wrong, and it really none of this could have went wrong, because betting on yourself in the way that I did it in, I felt like, in a responsible way, by saving up enough money and having a backup plan, I felt like, even if this doesn't work, even if I quit my job, I make no money and I have to go back to work, which is not so bad. I think working is not the issue. I think it's finding a job in a career and something that you. Enjoy doing in the meantime, that even if I do all that and I'm and it doesn't work in the way I would like it to, by the standard age, we'd still be okay. Seeing that, seeing those scenarios, made me feel a lot better about taking the leap. Now I say that to say that whenever I have shared that story or shared the tool and then allowed people to create their own scenarios. It really brings the dreams that you have. It brought the dreams that I have. It made it more real because it made us face. It makes you face when you're using a tool like this, the reality. And so I've had a lot of people, and I always say this that you know, once you start working with it, especially when it comes to just the numbers and seeing where you are, because that's the one thing you cannot escape. When you're using this tool or trying to figure out the actual numbers, you need to know what's actually going on. No more hiding, no more not knowing and ignorance to the numbers, because there's no way you can plan and see what can happen if you don't know, and you might be very optimistic in the beginning, and I want you to be optimistic very aggressive, right? I know, you know, I first like, let me see if I could reach fi in two years, which is like, you know, for most people, not possible, but it's good to at least have a starting point and even be aggressive, because once you put the numbers in, you will see the deficits. You will see what needs to change, whether you need to change and your behaviors or your expectations. And I think that's what's powerful about it, because you really do see it in your face, what decisions you need to make if you want to stay on a very aggressive timeline, or you want to cut back and have a more balanced timeline, like I have been doing.

Hey, hey, hey, journeyers. So I have a special announcement for you, and it's a special treat. So I'm excited to invite you to join the your journey to financial freedom book club. And so yes, my book. Your journey to financial freedom, a step by step guide to achieving wealth and happiness, has been helping so many of you, and I've been so encouraged and inspired by your feedback. But I want you who have not read the book or maybe bought it, but have not implemented anything to take action. And so I am starting a book club now. This book club can be joined anywhere. So you can be from anywhere. It can start anytime. You can do it by yourself. You can rally and invite your family, friends or co workers and get started. So this is how it's going to work. I have created free discussion guides that you can download right now that will help you have discussions around topics in the book, and with that, you can then have community, have some implementation, have some guidance on the topics in the book to help you take action. You can get those downloads for free by going to journey to launch.com/book club. There are going to be two discussion guides that come along with your downloads. One is going to be a chapter by chapter discussion for those who like to get really into details and weeds. And then there's going to be more flexible general themes discussion guide that you can choose from. These guides are packed with questions and takeaways designed to help you bring the book's ideas right into your life. So the first step is getting the book. If you haven't gotten it already, grab your copy of your journey to financial freedom. You can get that by going to your journey to financial freedom.com it's also available on Amazon, target at your local bookstores and the library. Don't forget your local library right now. Actually, it's half off on Amazon if you want to grab it for less than $15 and then you can start your own book club. And then join me in the month of April, which is financial literacy month, I'll be dedicating a couple of episodes of the podcast to some topics specific to the book and to the discussion guide, so you can follow along with me. So start your your journey to financial freedom book club right now. Go to journey, to launch.com/book club, to get started. So a few things I'm going to just share with you, a couple of inputs and things you need that I think will be helpful, regardless if you look more into this tool or not. That was helpful for me to figure out. Because again, if you don't know this, then you won't be able to move to the next steps and to figure things out. But essentially, what you need to start to figure out and map out your financial independence plan is you need to know your current investment balances, and that is key, because how are you going to know how much you need to save and invest over time without knowing your current starting point? So yes, that means looking up old 401, K plans seeing how much your current 401 K or Roth IRA or taxable investments are, but it is an input that you need to know for the fire Calc and just if. You're doing this on your own,

and those investment accounts include your pre tax retirement account. So that's your 401, K, your 43 b4, 57 or traditional IRA, Ira. And if you're doing this with a partner, that does include your spouse or your partner's pre tax accounts also. And then it's going to look at or you're going to need to know you're need to know your after tax retirement account, so your Roth 401, K or Roth IRA. And you don't need to have all these accounts to reach financial independence, but you're going to need to know the balances of these to get your starting point. And then your taxable investment accounts, and any other investment accounts that you're going to be adding to that's going to create and build up to your fi number. The next input that's pretty important, that you'll want to start with, and that the fi tool requires you to put in, is, when do you want to reach financial independence? What age and how many years left are you seeing or figuring out you'll need to travel on this path, that's going to be important, and that's going to change. And so the beauty about the fire calc in this tool is that it is something you go back and forth in terms of thinking about how aggressive you want to be, how realistic it is for some of your goals. So you might say to yourself, well, I want to reach fi in five years, like I want to be able to be done in five years, you put in all your inputs and realize, well, in order for that to happen, it's almost going to be nearly impossible, unless I get a job that's paying me 10 times more, which, hey, it can happen, maybe. But in order to be realistic, you might need to adjust your expectations and timeline out. So when do you want to reach fi? The other thing that's super important for this entire thing to work is how much you want to spend in financial independence and or retirement. That's going to take into account your monthly expenses and then your annual expenses. So your monthly expenses, that's going to be everything you spend and then your annual now, in terms of looking at what they'll be when you reach fi that might be different than your current expenses if you're thinking ahead. So in my case, when I was thinking about my fi number, when I looked out, and even today, as I look at my new financial plan, my fi number doesn't include our mortgage, because by then, our mortgage will be paid off. But it does include more travel. It does include more medical expenses and Kid expenses. So that's the other thing. If you have kids, one of the things that for us, that we look forward to is by the time we reach this goal, our kids will be in college or their early 20s. Now hopefully they will be self sufficient, but I definitely am one of those parents, one of those moms that want to help or provide resources and will want to help with certain things with them, and so there may be more expenses in those years. So you may want to think ahead at where you think you want to be an fi and how much and your budget may look different, but I think for just simplicity, you can take what you're spending now and multiply that by 12 to get your annual expenses. And then what we're going to do and what you need to understand are two rules. So it's going to be the 25 times rule and the 4% rule. When we look at your annual expenses that you want to spend when you're financially independent, we're going to want to multiply that by 25 and that is based on the 25 times rule. It is basically the premise that you'll save 25 times your annual expenses to retire comfortably. It's related to the 4% withdrawal rule, which suggests that you can safely withdraw 4% of your portfolio and have a 30 year retirement without, quote, unquote, running out of money. Now, of course, that is a very simple explanation, but it's important to just understand that, because that's what you're that's how you know and how you're going to account for and figure out your fi number, because you're going to multiply how much you want to spend by 25 and then five, and then when you get to that point of the fi number, multiplying it by 4% will show you how much you'll have, or how much you can draw down on that portfolio without running out of money. Now, of course, the fire calc it does that for you. It calculates that for you. But this is just so you can have an idea of how this all works. The other interesting thing that happens as you play around with your fi journey and the fire calc is the expenses. All the inputs matter, but your expenses matter a lot, because if you want to spend more money when you're financially independent or retired, you'll need more money, which means you'll need to invest more over time. And so I relate that to the guac lifestyle levels I talk about on the podcast and in my book, you're journeying to financial freedom. And the guac lifestyle levels go from one to five, five being more expensive and extravagant, one being more frugal. And so depending on where you are on that scale is going to matter a lot, because the more higher lifestyle or higher you spend, the more money you'll need to accumulate, and what you'll do, I certainly did this, especially in the beginning, is I tried to adjust to help me reach my number. Meaning, let's just say I thought, Okay, I want to spend $100,000 a year, which meant I needed a $2.5 million financial independent number. I need all my accounts to be 2.5 million that I can draw down on. That's a big number. And based on my starting point and my short timeline that I wanted to get there, I had to say to myself, now, either I'm going to extend the timeline so I have a longer time to reach 2.5 million invested, or maybe I need to decrease my spending. So instead of spending $100,000 a year, could I make $75,000 a year work? Could I make $50,000 a year work? And so you'll you'll have that conversation and dance with yourself and your partner, if you're doing this with someone, to figure out what you're willing to give on, or is it okay, I'm going to invest more aggressively, which means I'm going to cut back on the current spending that I'm doing so that I can get to that number. Because it's all it's puzzle pieces that fit together, but you some there's a give and take with each one. And you might decide. So in the beginning, when I was looking at my fire plan, my the fire calc that I first created, I adjusted for spending. I tried to lower our expenses and increase how much we invested in order to get to the number quicker. And then as I got on the journey and realized, wait a second, this is not sustainable for us. I actually don't want to work in this corporate job for the next five years. To reach this goal, I had to adjust my timeline. And so instead of me wanting, wanting to reach, or thinking I could reach financial independence by the time I was 40 years old, I pushed it out and said, what if, you know, it did take me until I was 50 or 55 but I am working in my own business, maybe making less money. Things are a little bit less consistent, but I have more time flexibility. I'm actually happier. What. What does that life look like? And so I was able to make concessions with myself as a family compromise, to see what worked, and you'll see that happens for you too, like the fire Calc and just the fire journey in general. You're gonna have to come back to and make adjustments, because you're not gonna stay the same. Your mind is gonna change. You might realize, as you start embarking and doing certain things, embarking on the path, that, hey, this is not working, or this is not something sustainable, which will then impact your journey. I'd mentioned the future value calculation. So once you have your starting point of how much investments you have, and then you have where you need to be your fire number, that's when it comes into play how much you can invest, or what you can invest over time. So just a straight line future value calculation you can do that. You can find any calculator online that tells you that, but it's going to assume the same amount every year. And when I created the fire Calc, I wanted to see and account for changes, and then even for journeyers who are now using this tool. You know, I thought about, okay, if someone's coming to this and they're still in debt payoff mode, or they also want to quit their job or travel the world, and they can invest as much or what if they're going back to school, and in five years, they expect to be earning six figures, and therefore can start investing more aggressively. So I wanted them to be able to model it out for those scenarios in the future that they thought they may have as I was building out the spreadsheet, the thing that came up for people and even for myself, is realizing, when you don't feel like you're going to make your fi number, how you can be flexible with your financial journey. So creating different scenarios within the tool within the spreadsheet that allows you to be creative with your journey. So one of the things I thought of was, well, the way I was thinking about financial independence at the time was I want to reach my fi number, but not have to touch it. So meaning I want to get to, let's say, the $2 million invested mark, but not necessarily draw down on that portfolio, unless absolutely necessary, because I wanted to have income streams, whether that was at the time, from real estate or a business which is not as passive, obviously, but some businesses can be. But I wanted to basically not have to touch my portfolio. And so scenarios like that, where you're not reaching your fi number in the timeline that you thought you could How can you creatively think about okay, but are there other sources of income while I'm building my portfolio? Maybe it is another job, a different job, but I don't have to earn as much or be in a stressful situation, so I have more choice that's at work flexible stage, where I'm getting more the benefits of financial independence without having. Reached it. And so I call that scenario one in my fire Calc, so that you can see, okay, what does early retirement look like if you don't have to touch your portfolio and you have more flexible streams of income? This is scenario two, where you are using and drawing down on your investment portfolio in order to pay for your living expenses, and then I do still have What are you on track for standard retirement? Because I think that's important too. I think the whole goal of this is to live a good life now, not wait until whether it's early retirement or standard retirement, but in order to do that, the fallback plan, the worst case scenario, if you are following this the content and you want to reach financial independence is if you create a good life and you're working, but you enjoy what you do, or you know you come to you come to live with it in a good way, and you don't stop working, maybe until your standard age. Are you still okay at that standard age? And what I want to see, or what I want people to see, is that even the standard age, even if you have to wait until then you'll be okay.

For me, the fire calc really helped me so much. It's a tool that I really wish. You know, I created it because it wasn't something available, and I'm sure you know, there's other tools out there and resources. I'm pretty sure of it since I've created this, but I know that this tool, for me has been powerful, and it has been powerful for most of the journeyers who've been able to use it, and so that's why I wanted to offer it as a standalone offer to basically help you map with real time and real numbers what your financial journey looks like. I hope you check the tool out and you give it a try. You can go to journey, to launch.com/fire Calc, that's f, i, R, E, C, A, L, C. I truly do believe that you can use it to help you map out what your timeline can look like you can create different scenarios. That's why I'm offering it. So you can go check out the fire calc by going to journey to launch.com/fire f, i, r, e, Calc, C, A, L, C, with the fire Calc, you'll get the tool, but you'll also get walk through scenarios and tutorials of how to use it. And guess what? I am hosting a live class so you can be shown in real time how to use the tool. The live class will be in April. I'll probably start doing more of these around the fire calc but the first class will be April 10, meaning you buy the fire CALC tool. Now you'll immediately get it along with the walkthroughs and tutorials. But you can also join me live on April 10, to watch me go through the tool itself and to answer questions. You can go to again, journey to launch.com/fire. Calc, if you happen to be listened to this after the fact, you can still get the tool. Be on the lookout for more information. Again, go to journey to launch.com/fire, Calc. Don't forget, you can get the episode show notes for this episode by going to journey to launch com or click the description of wherever you're listening to this and you can still grab your jump start guide for free to help you on your journey to financial freedom by going to journey to launch.com/jump start if you want to support me and the podcast and love the free content and information that you get here. Here are four ways that you can support me in the show. One, make sure you're subscribed to the podcast wherever you listen, whether that's Apple podcast, that purple app on your phone, your Android device, YouTube, Spotify, wherever it is that you happen to listen, just subscribe so you are not missing an episode. And if you're happening to listen to this in Apple podcasts, rate review and subscribe there. I appreciate and read every single review. Number two, follow me on my social media accounts. I'm at journey to launch on Facebook, Instagram and Twitter. And I love, love, love interacting with journeyers. There three, support and check out the sponsors of this show. If you hear something that interests you, sponsors are the main ways we keep the podcast lights on here, so show them some love for supporting your girl. Four. And last but not least, share this episode, this podcast, with a friend or family member or co worker so that we can spread the message of Journey to launch. All right, that's it until next week. Keep on journeying. Journeyers. You.

Transcribed by https://otter.ai