Uncategorised
6 March 2021

The Milestones of FIRE

By firebynumbers

When people start the journey towards FIRE, there is a lot of excitement. Energy levels are high and motivation is strong. A lot of people find themselves reading just about every blog available to them, they find all the podcasts, they research all the books. Spreadsheets are developed and costs are tracked, budgets are made, financial forecasts are compiled. There is a plan in place, and at least for me, it just about became an obsession.

After a couple of months though, spending is aligned, your investments are starting to set up and you are just in the accumulation stage and waiting for that FIRE number to be reached so you can finally get to that end goal.

A great deal of satisfaction is achieved, life is on track and you feel like every day you are working towards something. But then it starts to creep in… “what should I do now?” The end goal will most likely be years away, is there anything to keep focused on in the meantime? How do I maintain the motivation throughout the journey?

Of course, there is a little bit of excitement seeing the investment portfolio grow each month, I know I am getting closer to reaching the FIRE target. But I need something more, something just to keep me on track. I talked about in my GOALS post, that it is important to set short to medium term goals that lead to a long-term goal. So why should FIRE be any different?

I have now decided to set myself the following FIRE Milestones which I will track as I am in the accumulation phase of my FIRE journey. The Milestones will allow me to continuously ensure that I am on track to reaching my FIRE target. And as they will be more regularly occurring goals, it will allow the motivation to remain throughout the whole journey.

And once each of these Milestones are met, it sounds like a good opportunity to give myself a bit of a reward. After all, need to allow myself a little bit of luxury every now and then.

Just a note, the order these occur in will be different for different people, it is largely irrelevant, just as long as you are progressing to reaching that final target, that is the important part! Some of the goals will not be necessary at all.

FIRE Milestones:

Reach Positive Net Asset Value

For some lucky people, they will never have a negative net asset value, but in this world, tuition fees are a thing for a lot of people. I am not necessary suggesting you need to pay off your student fees first and foremost (far from it actually). But when you first reach a positive net asset value (assets minus liabilities) you have reached the first milestone!

Now that the first milestone is out of the way, it is time to start building that wealth.

Build Your Emergency Fund

This number will vary for a lot of people, but typically people like to have 3-6 months of expenses in their emergency fund. It all depends on their risk tolerance, as well as things like job security, dependents, and what your expenses are typically like. But once this fund is built up, it is time to start pumping that money into your investments.

Reach $50,000 Net Asset Value

I was going to have the first net asset value milestone at $100,000. But remember in this POST where I talked about the first $100,000 is always the most difficult to make, I thought it might be better to keep it a bit lower so it happens sooner to keep that motivation going! Remember, even though things might start slow, the snowball effect will take over and you will be growing that wealth in no time.

Reach FU Money

Some people like to have the FU Money kept as cash, but I do not believe that is necessary. And although FU money might be looked at as similar to emergency fund, it is different. As the name suggests, emergency fund is for, you guessed it, emergencies. Whereas the FU money is a more luxurious concept. It does not just cover your essential expenses; it covers your typical lifestyle expenses. It also covers them for a significantly greater period, typically 1 – 2 years.

What is FU Money for? Well put simply, it gives you freedom, and that is what FIRE is all about. FU Money gives you the power to walk in to see your boss tomorrow and tell him you quit, and you have the confidence to know that you can survive a long period of time without a regular income. The confidence of knowing you always have this option makes FU Money so powerful.

Reach $100,000 Net Asset Value

Remember I said how the first $100,000 is the most difficult, well now that you have reached this milestone, the rest of it should be easy right? Well, the hard work is done, your financial habits have changed, and you are now in the zone to reach your FIRE target.

Reach 20% of FIRE Target

Why did I choose 20% as the Milestone? Because of what 20% signifies, the majority of us work Monday-Friday, 5 days a week. If we have 20% of our FIRE target invested, realistically we could take one day off work a week and still maintain the same lifestyle.

Reach 40% of FIRE Target

Same as the previous Milestone, now you can take 2 days off work a week. You are basically already semi-retired!

Reach Half FIRE

Alright, when you reach the Milestone of Half FIRE then I think it is time for a real celebration. Just think of what reaching this Milestone would mean? If you are aiming for FIRE as a couple, it means that one of you could essentially stop working right NOW. Think of the sort of freedom that provides?

You should find that from now the Milestones will be coming thick and fast! The excitement of knowing you are about to reach FIRE should really be setting in.

Reach 60% of FIRE Target

This one should come relatively soon after reaching Half FIRE (after all it is only an extra 10% of your FIRE target), but now you can 3 days off work a week! Imagine that, 5-day weekends, every week!

Investments contribute more than Savings

This target will be difficult to measure but I think it is an especially important Milestone for psychological reasons. It also will vary significantly from person to person as everyone on their FIRE journey is unique and will have different numbers.

Basically, the Milestone assumes that your investments have provided more towards reinvesting than what your savings has been. Keep in mind this Milestone will also happen some months, and then not happen other months as the market goes up and down. But it is such a nice feeling knowing that your investments are working harder than you are!

Keep yourself strapped in though, the next milestone is going to be a big one.

Reach 80% of FIRE Target / Lean FIRE

You have done it! You have reached FIRE, sort of. You have reached Lean FIRE at least. So realistically, you COULD stop working right now and live off your income producing assets. It might not be the most exciting life, but it should be able to cover your essentials and day to day living. Think of the freedom that gives you?

Reach FIRE

That is it, you have done it. The time for celebration is NOW! You have complete financial freedom and can ‘retire’ whenever you want. You can safely draw down 4% (or whatever number you have chosen) on your portfolio, forever (although I do recommend having a little flexibility).

If you do not feel like going to work next week, you do not have to. You can call your boss and tell him you have had enough and never go back to work again. Of course, you do not have to, if you enjoy your work (and hopefully you do), you can keep going and just splash around more cash on luxuries to put some more enjoyment in your life.

Or you can pursue something you always wanted to but never had time, you can become an artist, you can start woodworking, you can volunteer. Whatever is meaningful to you, that is what you should spend your time doing!

Summary

There we have the following 12 FIRE Milestones –

  • Reach Positive Net Asset Value
  • Build Your Emergency Fund
  • Reach $50,000 Net Asset Value
  • Reach FU Money
  • Reach $100,000 Net Asset Value
  • Reach 20% of FIRE Target
  • Reach 40% of FIRE Target
  • Reach Half FIRE
  • Reach 60% of FIRE Target
  • Investments contribute more than Savings
  • Reach 80% of FIRE Target / Lean FIRE
  • Reach FIRE

The reason I made these Milestones is just to be able to keep motivation to reach that final FIRE target. There can be a long journey between deciding to go for FIRE and actually obtaining it. Having these Milestones allow landmarks along the journey and make the whole trip seem a lot less overwhelming.

On this PAGE I have gone through my progress through my Milestones, it is mostly just for me to be able to look back on and see the progress I have made so far to keep be focused to reach the end. But I also hope it can help others see the journey ahead of them. Some of these Milestones were attained before I even know I was aiming for FIRE, so the dates when achieved are only estimates. I do wish now that I was tracking everything since I was an adult as it would have made some interesting reading looking back on.

I hope sharing these FIRE Milestones keeps you motivated on your journey. Without even realising you will be going through them faster than you ever imagined, but just remember to now let life simply pass you by while you look toward the future. Be proactive in enjoying your life in the moment as well, the journey is more important than the destination.