fi.log

The math behind FI

The core concept is simple. You need 25x your annual expenses invested to be financially independent, assuming a 4% safe withdrawal rate.

The formula

FI number = Annual expenses × 25

If you spend $40,000/year, you need $1,000,000 invested.

Why 25x?

The 4% rule comes from the Trinity Study. Historically, withdrawing 4% of your portfolio annually has a high probability of lasting 30+ years.

$1,000,000 × 0.04 = $40,000/year

Two levers

There are only two ways to reach FI faster:

  1. Earn more - increase income
  2. Spend less - decrease expenses

Spending less is more powerful because it reduces your FI number AND increases your savings rate simultaneously.

Time to FI

Your savings rate determines how long it takes:

  • 10% savings rate: ~51 years
  • 25% savings rate: ~32 years
  • 50% savings rate: ~17 years
  • 75% savings rate: ~7 years

The math is clear. Higher savings rate = faster FI.