We have been doing some soul searching trying to figure out how much money we need to save to reach financial independence. This of course depends on the level of spend we expect to have each month in the future. In this post I will outline the framework of our plan to reach FI. I don’t have an exact timeline yet as that will need to be sorted out as we transition through our plan.
The Goal
After much discussion, we determined we could live comfortably on $5k each month once we are in the RV and cut ties with our house and other excesses. Using the 4% rule, that means we would need to have $1.5 million in the bank. I personally don’t like to use home equity in this equation, strictly cash and investments. You might be asking why? For our circumstances, there are a couple of unknowns at this point in the process.
1. My son goes to college in a year and a half and we will be paying for some of it.
2. Do we use the home equity to payoff the RV loan or just bank it and let it grow?
With these factors looming in the future, I currently view our home equity as an untapped resource that may or may not be available depending on decisions we have yet to make. Because of this, I will not factor it into our retirement savings until these unknowns are resolved.
The Plan
Our current plan for the next year and a half is to continue on as we have been, with some exceptions.
We need to cut our variable spending and try to increase our savings rate. Our current savings rate is a paltry 10% of household income and that needs to increase significantly. In particular, we need more savings outside of pretax accounts. It’s hard to retire early when you can’t touch your money for 15 years.
As the murky college financials become more clear we will be able to see how it will impact our personal finances. C’mon scholarships!! After that the real fun begins! Once our son is off to college we will start researching places that allow full time RV living, at a discount of course, and determine the place that best suits us.
From there we will start the liberating process of selling or donating belongings and household items. We have considered an estate sale as a option. Once we have rid ourselves of the clutter and material excesses we will put our house on the market, hopefully sell it for a hefty profit, and start our new life.
The benefit of RV living is that we can go into super saver mode until we reach our goal of $1.5M. After we reach that goal, the decision is ours whether to work or not. That is the day we truly look forward to. The most liberating day of all!
Family and being able to decide how we choose to live every day are the most important parts our lives. No one knows how much time we have in a lifetime. My wife and I have already spent over 50 collective years having other people tell us where to be and what to do on an almost daily basis. This is our roadmap out of the debilitating life cycle of debt and consumption. It is the light at the end of the tunnel leading to a happier and more satisfying existence.
We want to enjoy this life our way because it’s the only one we get. Factors beyond our control will decide how it ends, but we will decide how we live it.