I have been tracking our expenses for just under 3 years. This has been a key tool in fixing our financial outlook.
Using our annual spending and estimating future years we can work out our financial independence number.
This is all speculations and a bit of fun, we will have to wait to see what our actual spending and real returns are.
2019 – $61,553
2020 – $77,555
I expect to have our home loan repaid by 2024 so we can remove loan repayments.
Minus Home Loan Repayments:
2019 – $40,075
2020 – $54,077
In 2024 our youngest kids, the twins will start pre-primary. This will hopefully remove childcare fees, which we are paying for three kids in 2020.
Minus Childcare fees:
2019 – $40,075
2020 – $38,607
Looking ahead, our annual spending seems to be around $40,000 per year. Adding a buffer to allow for some extra one off costs, such as car purchases and extra travel, we will be around $50,000/year.
$50,000 would require $1.25m portfolio based on the “4% rule”. Personally I prefer a larger buffer and will use 3% at this time.
$50,000/year at 3% = $1,650,000 portfolio.
As of January 2021 our combined net worth is $214,805. We would need an additional $1,435,195!
Compound Interest Calc!
Starting in year 2024, with the home loan paid off, childcare fees gone and superannuation grown over the last 3 years to around $312,464.
$23,478/year previous home loan repayments which is now savings
=$75,816/year ($2,916/fortnight) invested for 11 years is $1,649,806. (5% interest)
The year would be 2035, I would be 46 years old and my wife would be 44. Our kids would be 18 and 16.
It will clearly come down to market returns in those last few years but as a rough guide.
By the time our kids finish school and start living their own lives, we should be free of the 9-5 requirement of work and be able to follow anything of interest, regardless off monetary gain.
I find it hard to imagine us both not working in some capacity over the next 30+ years, but not having the worry about making ends meet will be a satisfying feeling.
Also once the kids have moved out of home, the idea of being a global nomad and just slow travelling the world is extremely appealing!
Thanks! Hope you enjoyed our little number crunching!