Filling in the Gaps

walking man

Look, Ma! No more gaps!

I’m more or less financially independent.  But there are steps that I need to take in order to feel completely comfortable leaving my employer for good.  Simply achieving FI on paper isn’t enough to up and leave a steady paycheck.  There’s more to making a decision like this than hitting a certain number on your net worth.

Currently I’m working on identifying and filling in the gaps in an attempt to be sure that I’m ready to quit.  I consider this exercise a pre-flight checklist to review before self-terminating my gig.  It’s going to be a lengthy process, and I expect it to take the entire year, running into 2015.

Gap #1:  Financial Readiness

Whether or not I consider myself to have reached the milestone has a lot to do with how you define the term.  I’ve run across a few different definitions.

Safe Withdrawal Rate (SWR) #1 “Semi Risky” Strategy

To meet FI under this scenario, you can live on a 4% withdrawal rate on your assets.  This is considered safe by most professionals in the financial industry.  In this case “assets” is your pile of money which can include taxable accounts, retirement accounts, and the equity in your house.

Note #1) This assumes virtually no debt.

Note #2) 70% of your assets need to be in stocks so you can take advantage of their higher earning potential over time.

SWR #2 “Conservative” Strategy

The same as above with two major differences which significantly reduce risk.  1) Withdrawal rate goes down to 3%.  2) In this scenario, you shouldn’t include equity in your house as part of your assets.

It’s harder to achieve this goal, but you’ll have a much better chance of success (and less time spent worrying about your money) if you reach FI using these criteria.

Other Passive Income Strategies

This scenario covers any structure which reliably generates enough income to cover living expenses.  Using rental properties to create monthly cash is the most common way to do this.  This doesn’t apply to me — I’m not interested in becoming a landlord.


I currently have a net worth of about 750K. You can see the details if you’re interested.

In my current residence, my living expenses are appx 30K a year.

  • Since 4% of 780 is $31400, I’ve hit my target using the riskier FI model.
  • Using the second (insanely, pretty much bulletproof-level conservative) model, I would need to save an additional 370K

I’ve realized I’m not happy being just barely FI, especially considering that I believe the market is currently overvalued.  If I quit my job and the market drops, say, 25% inflation adjusted over the next three years, I’ll become so nervous about money that I’ll probably be seeking employment again, i.e. returning to an industry that I’m completely burnt on.  This would be a big fat failure.  On the other hand, if I can downsize significantly — save 40% per month on housing costs (mortgage, insurance, property taxes) — this would drop my monthly living expenses by about 8K a year and bring me to a 22K annual spend rate.   Here, I’d be very close to achieving the more conservative (safer) version of financial independence.

The second gap which is preventing me from feeling as though I’ve filled in Gap #1 is to to spend a year tracking all expenses.  I know I’m within 1 or 2K of a 30K/yr spend rate but I don’t track absolutely everything. This needs to change so that I can catch items that are missing, e.g. some cash purchases, etc.  So this year I’m tracking absolutely everything manually to be sure I am not missing anything.

I do anticipate that 2014 will be my last full-year of working in my industry.  It’s also worth noting that putting in the extra year will allow me to save another 45K or more, which will only help secure the financial picture.

6.03.2014 Update:  The planning portion of this goal has been 100% completed.  See the Drawdown Series of posts for details.


  1. Complete tracking expenses for 2014
  2. Downsize the house

Gap #2) Mental Readiness

I’m a believer in doing what you can to test the waters before making a major life change.  Live with the person you think you might marry for a while before tying the knot.  Rent in an area where you think you might buy a house.  Talk to people in a field that you’re thinking about going into before signing up for classes and putting a lot of money into switching careers.

It’s hard to come up with a similar test for retirement.  And the problem is that once you’ve quit your job, in most cases it’s a 1-way escape pod.  You can’t crawl back up the hatch and claim your job back — you’re now out there in space.  It’s an irrevocable decision.

The best I could come up with was to save three weeks of vacation and take them consecutively.  The time has already been approved by management and these weeks will be in April 2014.

I’m interested to see how I feel during and after the time off.  It’s essentially going to be an extended stay-cation.  I plan on being active during these weeks:  a couple of hours of exercise a day, some playing of guitar, a healthy dose of reading, no television watching, minimal movie-time.  I typically don’t have any trouble filling my (very limited) free time, so I doubt that having three weeks’ worth of hours to fill is going to cause any problems.  But I want to know for sure.

Part of this exercise will be to write a report about the experience.  Seriously, a freaking report.  I’m aware of how nerdy this sounds.

But I want to summarize any challenges, how I felt in general, ups and downs, interests I was able to pursue, or interests I didn’t pursue along with accompanying excuses.  In particular I’m very curious to know how I feel the Sunday before returning to work.

Because normally on Sundays I feel a sense of dread and foreboding.  Like there’s a cloud of shit hanging over me, just waiting to start raining all sorts of evacuated human products down on my head.  Because that’s what work generally feels like, so the anticipation of it is extremely unpleasant.

If I’m eager to get back to it — well, maybe I’m not ready for FI.  But if I dread it like hell — if I’m instead dreaming of having the next 3000 weeks without work — then the experiment has gone well and I’ll consider myself to be mentally ready.

4.29.2014 Update:  This goal has been completed.

See the Three Weeks Off series of posts:

0 – Prelude

1 – Getting Into It

2 – Close to Over

3 – Wrap Up

Gap #3) Partner readiness

My SO is not completely on-board with all of this.  I’d say she’s about 80% there.  She has a high-earning job — along with all of the accompanying stress — and she saves a high percentage of her earnings.  And she doesn’t spend a lot of money.  Never goes shopping for pleasure.  Doesn’t take expensive vacations.  Doesn’t insist on high cost renovations for our home or fancy cars.  She also has a very similar net worth to me.

However, she has trouble envisioning a life without work.  She’s gone so far as to say that she can’t imagine a life without it.  We’ve had the talk and she knows damned well that I can’t continue working in my industry much longer.

So it’s possible that she’ll continue to work while I’m retired.  But we need to continue the discussions to ensure that she’s completely on-board with the changes that are in store for us.

At the end of 2014, the gaps should be filled in, and with any luck, I’ll be waltzing my way into my manager’s office to give my notice.

Because once those holes have disappeared, there’s simply no longer any reason to work in the formal model.  It’ll be time to move on to the next phase.







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8 Responses to Filling in the Gaps

  1. Jared says:

    Just wanted to say that I’m really glad to see that you’re taking the time to write about #2 (the mental side of ER)! I feel like the financial side is covered in great depth, but the process of preparing for and making the actual transition is something I haven’t found a lot of info/anecdotes about.

  2. livingafi says:

    Hi Jared. Glad you’re enjoying some of the posts. I’m making this last year of my FI journey public for exactly the reason you mentioned: I wasn’t able to find a lot of guidance on making the jump, which means I’m largely relying on myself for answers. I figured it wouldn’t hurt to air out as much as possible, and for sure writing about the challenges helps to clarify thoughts and positions.

  3. SDREMNGR says:

    I enjoy your detailed write-ups. Good luck with your progress. I look forward to reading it as it happens.

  4. John says:

    Great blog on the “softer” parts of ER. I’m looking to retire at the end of 2015 and I’d love to see a write-up on “the talk” with your spouse. Simply put, my partner is a stumbling block. She wants more luxury and more big trips in ER. As I’m the main earner, it would mean probably 5 more years of work. Five more years of corporate drudgery would only end in two ways — crying myself to sleep every night because of job related stress or, in all seriousness, a self-inflicted gun shot to the head. How did you handle the “I’m done, I’m quitting, and you can work if you want to” talk?

    • livingafi says:

      Thanks for stopping by. It sounds like you and your spouse have very different RE numbers. Sometimes I think that this is *the* central problem with the RE model; if you don’t see eye to eye on this issue with your partner, it’s challenging to find a middle ground. You’ll notice that I haven’t updated Filling in the Gaps to indicate 100% partner onboarding completion. We’re still working on it. (We are much, much closer than we were a year ago and I have no doubt we’ll get there fairly soon.) At any rate, in the meantime I’ve learned quite a bit about approaches that work better than others. Also: a) it takes a lot of time to get folks who aren’t naturally predisposed to the FIRE mindset to come around — this is a lot more than a 1-conversation process and b) compromises need to be made in some cases. Personally I had to work on my listening skills in order to really identify the blockers for my wife, which allowed us to start working on them together. This topic is definitely post worthy, though — I’d just been waiting to complete the fixes my own house, so to speak, before offering guidance on how others might want to go about it on their own.

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