The Only Question That Matters

When can I quit my JOB!?!?

It is a loaded question. And of course … IT DEPENDS.

It depends on your current situation. It depends on you current spending habits. It depends on your current income level. It depends on your investment holdings. It depends on your risk appetite. It depends on your age.

The best news however, it is not important where you are right now. You just need to be willing to change, adapt and focus on what matters most in your life.

Financial Phreedom is not the end goal. It is a means to achieve the life you want. Whether you want to start a non-profit, traveling the world, or make your favorite hobby your full time focus.

Here was my process to figure out about the time I could quit my job and live the life I want everyday.

STEP 1 – What is important to you?

For me:

1. Live a healthy life. Work out, eat well to receive all necessary nutrients and limit processed foods (sugar).

2. Spend as much time with friends and loved ones.

3. .Accumulate wealth or passive income that I don’t have to work 9-5.

4. Travel.

STEP 2 – Assess your current situation for each.

1. Healthy lifestyle – Can always improve. I enjoy the after workout feeling but can be struggle getting to the gym especially in the winter. Living in Philadelphia I have easy access to Reading Terminal Market  where I pick up fresh fruit, greens and locally sourced humanely-raised meats.

2. Spend time friends and family – Working a full time makes it hard to spend time with anyone that does not live within a hour radius of your home. Currently only have time on weekends and the occasional week day to spend time with people I care about.

3. Wealth – I started tracking my net worth in May, 2016 from May to today I have increased my net worth by 45%, to a staggering ($15,993.50). Break out as of January, 2017 :

4. Travel – I traveled more in 2016 then the rest of my life combined. Trending in the right direction. Yet I have never left the U.S. so passport is the next step.

STEP 3 – Make a Plan

1. Healthy lifestyle – Get to the gym 3 times a week. I would love to switch my workouts from after work to before. I’d like to become a better cook, one of my favorite places to get meal ideas is here. Especially when I can make use of an easy recipe for the slow cooker.

2. Spend time friends and family – Other than weekends I get about 20 days of paid time off. I plan to fully utilize my time off compensation.

3. Wealth – I have a lot to talk about here, and what this blog will revolve around. Track your spending, create an emergency savings you feel comfortable with, pay off debt and invest. Based on my 2016 numbers I spend around $35k a year ($25k if I exclude student loan payments). Here is my current (rough) plan:

A. Emergency savings – $4,000. DONE.

B. Contribute to 401k to receive employer match.  DOING IT.

C. Pay off my student loans. My monthly payment is $544.74. I plan to pay an extra $350 per month.

D. Save for short term goals. Plan on saving $611 per month. This I don’t have a plan with right now. I may contribute to ROTH IRA or pay off my highest interest debt. I like to think of this as my flexible savings. Having cash means options. Down the road I would like to purchase a rental property.

4. Travel – I have budgeted for 2017 for $2,000 to travel. No plans as of right now.

STEP 4 – Figure out when you can leave your job.

We now know what is important to us and have a rough plan on how to achieve it. I say rough because there is much more to talk about in regards to investing, but this gives us a good start on what we need.

Using the 4% rule or 25x spending we can calculate how much we need to retire at any time by multiplying your spending by 25.

I put together a google sheets document here.

Input in cell B4 under “Actual Value” the value of your portfolio today.

Input in cell C4 your age.

Input in cell E2 enter your current spending per year.

The spending column will increase by 3% a year based on projected inflation rate. Column D “Portfolio Value” is the value at each age you need your portfolio to equal in order to leave your job.

I entered $30,000 for my spending as I will not have student loans when I am older so I decided to split the difference between what I spent total last year ($35k) and what I spent without student loans ($25k).

Taking a look at my current retirement accounts, clearly I have work to do.

401k (vested) : $18,839

ROTH IRA :  $5,378

Total : $24,217

The key to this calculation is max out your 401k which is $18,000 and max out your IRA contribution of $5,500. Which you can see being calculated in column B titled “Actual Value”.

Based on my inputs I will have a portfolio 25x my spending when I am 49.5 years old. Better then working until I am 65! But I guess I should wait to give my employer a heads up.

Now I have $50k of debt that I feel pretty strongly about getting rid of which changes these calculations since I am currently not maxing out my 401k. However this gives me a good start and a goal to work toward.

-FP