Hey Reader,

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Monthly Money Meeting!

Don't forget to update your Net Worth to check your financial progress! Ways to track:

• Your Own Spreadsheet
• ​Money Fit Tracker Spreadsheet
• Personal Capital (Free + Retirement Planner)

Need the Monthly Budget Meeting Agenda?

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Money Fit Challenge of the Month: Calculate the TWO MOST CRITICAL NUMBERS . . .

Calculate these two numbers to see your Financial "Big Picture"

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CHALLENGE #2a: Calculate your Financial Independence "FI" Number

The amount of investments you need to be Financially Independent.

F.I. NUMBER = Annual Expenses x 25. (Math behind this equation).

Example: Annual expenses: $60,000/year x 25 = $1,500,000

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Purpose of calculating F.I. Number: MOTIVATION to realize this OBVIOUS YET CRITICAL FACT:

How much you (1) INVEST and (2) SPEND determines HOW LONG you it'll take to become financially independent.

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MY FAVORITE ANALOGY: F.I. is the RACE we have to run. 🏃‍♀️

• Our EXPENSES = Determine The LENGTH of our F.I. race.

(LOW expense lifestyle = 10k run vs. HIGH expense lifestyle = 50-mile Ultra-Marathon).

• HOW MUCH we SAVE & INVEST = The PACE we're moving toward the finish line (walking, jogging, or running)

If we spend *everything* we earn, we are walking in place.

DEBT is a huge WEIGHT that SLOWS you down -- PAY OFF (non-mortgage) DEBT before investing.

Lifestyle Inflation (1) lengthens your race and (2) slows down your pace toward Financial Independence.
If that works for you, go for it! Just make sure it's a conscious choice and you'll still retire on time.

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CHALLENGE #2b: Calculate your SAVINGS/INVESTING RATE

The MORE you save, the SOONER you'll be Financially Independent.

This chart assumes you start with a nest egg of zero and doesn't account for anything other than your investment contributions (e.g. social security, pensions).

Notice the right column is WORKING YEARS until retirement, not retirement AGE.

Example: If you started saving 15% of your net income at age 25, you'll have 43 working years until you're financially independent (at age 68).

More on this chart here.

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SAVINGS (INVESTING) RATE = Annual Amount Saved (Invested) / Net Income*

*Net Income = Gross Income minus All Taxes

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Another way to back into your Net Income:

Net Income = Take-Home Pay + add back 401k contributions, HSA contributions, other savings taken out of your paycheck.

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EXAMPLE:

You save/invest:

• 5% of your salary to your 401k ($2,500)
• Your employer matches half of that ($1,250)
• You put $6,000 in a Roth IRA every year

= $13,350 Invested Annually

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Your salary (gross income) is $50,000 minus $8,000 in federal taxes and $2,000 in state taxes.

Your Net Income: $40,000.

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$13,350 (saved/invested annually) / $40,000 (gross income) = 33.3% Savings Rate

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"But I don't want to retire early"

You don't have to! Retiring at a "normal" age still requires saving. 🙌

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📣 Your Financial Cheerleader,