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I used the save till it hurts mentality for the first several years without goal numbers. If you need a number, plan conservatively with what you know or can reasonably estimate now. Adjust as things change.
This is basically what we are doing. 25% hurts, though we could certainly squeeze more if we really tried. We plan to allocate most of future raises (which should be fairly good) to investing. Then sometime in the next 5-10 years hopefully come up with a semi reasonable number to start chasing.
Coach
With Sm1 here ...the first few years are just saving and investing as much as you can. And tracking spending. Each and every dollar, each and every month.
Once you have this data for about 3 years you'll be in a much better position to extrapolate and forecast. All the while investing to the max in your trad 401k and Roth IRA, which should had time to be at least $60k and $21k respectively, with even a 0% return.
My wife stays home and we plan on public school so childcare costs are really low for us early on, at least compared to most
I did this math a couple years ago when I thought of having more kids. I estimated I want an extra $1m per kid. About half spent getting them to 18, half spent for college. This is for an upper middle class lifestyle. Good public schools, extracurricular activities, a bedroom for each child, undergrad paid. I estimated for each additional child I’d need to work an extra 5 years. If money were no object or I was ok compromising on lifestyle and opportunity, I would have definitely gone for more kids. I decided I would rather retire in my 40s.
Shesh. Well I don’t think my kids will be getting an upper middle class lifestyle lol. We intend to raise our kids more or less the way I was raised. Shared rooms growing up, lots of sports, helped our a lot in college (but certainly no where no enough to pay for a $30k+ per year tuition school). I think we should come in at well less then $1m, but it will still be substantial.
I like your process, though. I should sit down and figure out, as best as reasonably possible, how much each kid will cost. We are more than happy to compromise on lifestyle, but it should be an informed decision.
I had a number that I already reached, and now I got a new number I am targeting. Since hitting that original target, I have loosened up a bit in terms of spending, and trying to enjoy life more.
I like that. Bigger sacrifices early for more reward later on. All about balance.
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I set a pretty arbitrary number in my 20s, and have adjusted my number multiple times in my 30s after having a kid and running various scenarios.
Build the habits now like you’re doing, and the rest will fall into place. You may even surprise yourself that you can call it quits sooner than you thought!
We always said we wanted to retire at 50 or 55 and just stated diligently saving and investing. We eventually started calculating what we need to retire and exceeded that goal in our early 40s. It takes so much patience and dedication but it’s worth it. It was hard to focus on work those last couple of years knowing we were so close. You’ve got this!
Yes! Appreciate this post cause I never hear about fire people who don't have a number! I have a spending goal and invest the rest. Most of "the rest" is direct deposit to investment accounts from my pay so it's hard to spend more anyways lol. But if I have what feels like a spendier month, I try to balance by reeling it in for a bit.
Currently investing 50%+ and will continue chugging along till I feel like I've gone through some life stages (marriage, kids, house, etc). Only one of those is on the semi-near horizon. I think once I get through those and better know my whole financial picture, I'll be able to identify a target.
Coach
Make up a number (25x of your current expenses is a good start), and set a target FIRE date, may be 15-20 years from today. Plug these numbers in excel and create an year-on year view. See if your current savings/earnings will take you there.
Some assumptions that I take
- expenses, salary and savings will grow at rate of inflation - 2%
- investments will grow at inflation+5% - 7%
- map additional expenses like college tuition
It would start making more sense once you will come closer to 10x your expenses in your investment accounts and your return will start covering most of your expenses. Once your expenses are fully covered by your return - you are ready.
Coach
One more advise - FIRE planning is not same as predicting the future, you don’t have to be perfectly sure. Start with assumptions and keep fine tuning with experience and changing situation.
It is admirable - by all means set goals and adjust goals etc... but don't fall for FOMO / feel behind. You are N of 1, unique in earnings, preferences, wants and needs. You can't engineer a perfect number today. You can develop discipline, together as a family ideally, with principles and structure that put you ahead over the long term (we do hard things, we work hard, we save, we spend less than we make, we don't overpay/we are wise stewards and consumers) - the muscles you get from that plus returns in the market will put you in good shape and you compound that over much time and slowly surely your retirement/financial independence comes into clearer focus.
yes, begin with the end in mind - also yes: control the controllables and pass on a legacy of financial intelligence too. GL!
Coach
As a single, non homeowner, I concede that my burn rate may well increase to a level not yet known
Subject Expert
I regard all my planning numbers as approximate.
Subject Expert
So far no. I expect a big change when I have children.
Coach
I agree with your approach. I think it is very hard to have an idea about post-retirement expenses until you get within 10 years. ESP if family situation will change. Would just have a directional target and keep rowing.