Formula to Break the Daily Grind

Updated: Apr 2, 2021

My kids have been in elementary school for a few years now, but still each school morning dawns with a cacophony of complaints and tears. I don't want to get out of bed. I don't want to get dressed. I DON'T WANT TO GO TO SCHOOL. Now I use the "I get to" method to help them brainstorm good things to look forward to today. This is more effective than my former soothing words, which sounded something like this:

"It's Wednesday! It's almost the weekend, and then you'll have two whole days to play and relax (until Monday, when you'll head back to school). But it's March! Which means it's almost summer, and you'll have 3 whole months to play and relax! (Until September comes again). But then you'll be in third grade! And you'll only have... um... nine more years of school. And then four more years of college, maybe grad school. But then you'll be done with school FOREVER! And then instead of walking up early, getting dressed, and spending your whole day at school... you can spend the day at work instead! Until you're 65, and then if you've saved enough money you can finally sleep in, play and relax every day. See... only 57 years to go! You've GOT this!"

Not very inspiring or encouraging. Which is why, when I first learned about the FIRE movement (Financial Independence, Retire Early) sweeping all of our media channels, it felt like a tear in the Matrix, a loophole for escaping. Like many, I was introduced to the theory via Mr. Money Mustache. As MMM (as his devoted followers call him), elegantly explains in his viral post, "The Shockingly Simple Math Behind Early Retirement", once you've invested 25 times your annual living expenses in low-cost index funds, you can retire and live off small withdrawals and the growth of the fund will allow your money to (most likely) last the rest of your life. Essentially, retirement is not an age, it's amount.

Here's the basic formula:

  • Annual living expenses (spending) x 25 = the amount you'll need to save and invest. So if your annual spending is $40,000, you'll need $1,000,000.

  • You can then withdraw 4% of your money each year to cover your living expenses (4% of $1,000,000 will cover your $40,000 lifestyle).

  • If invested in a low-cost index fund, your money will grow at an average rate of 7-10% per year (based on historical trends). So even though you withdraw 4% per year, your fund will continue to grow and is likely to last for the rest of your life (this part is under debate, and there are many articles discussing whether the "4%"is too conservative or not conservative enough).

Mr. Money Mustache explains it much better, with ALL the details.

The Mr. Money Mustache blog is outstanding for entertainment value, even if you're not interested in personal finance. I myself read it for entertainment for about a year before the financial concepts sunk in. And when they did sink in, BAM... I was a convert. Over the following months, I figured out how to cut our spending by about half until we could live off just one salary and invest the rest (shop at Aldi instead of the fancy grocery store! Turn the heat down to 62 during the day! Use daycare instead of private nanny! (she relocated around that time, we never would have fired her)).

I descended into a self-constructed Excel fortress of calculations, scenarios, and timelines. I figured out how to reduce our working timeline to 10 years, and then to 8, since that wasn't fast enough. And then to 5 years for me to retire alone when I realized we were living off of one salary, so why did I need to keep working at all? But then slowly, I started to back away from this plan. We are still saving and investing over half of our income. But quitting my job no longer seems imminent and inevitable. I realized that I like the security of having more money than we need, and the freedom of being able to make responsible purchases whenever we want to, and what I really want is just a little more time to spend on things that I enjoy. Now we're back on a 10-year timeline for both me and my spouse to be able to retire together, or at least scale back, and still be comfortable financially.

In the meantime, I've been restructuring my work day. Working with more intensity and focus, so I accomplish my tasks in less time, and can spend some of the workday peace & quiet on my own projects. Sort of like the 4-day workweek concept that seems to be gaining some hype. And then wrapping everything up by school dismissal, so I can spend more relaxed time with my kids. So for me, at least, I guess the real life hack isn't figuring out how to stop working earlier, but figuring out how to enjoy my days more.

Here are three great places to start if you want to dig into this topic:

Personal Finance Club is a great resource for learning investing basics. His Instagram is highly entertaining and easy for beginners to follow.

Stop Working. Start Living. A couple who retired in their 30's analyzes real case studies to tell people how long they need to keep working.

Tools to track your own early retirement progress.