My Journey to FAT FIRE - FIRE Number, Income & Expenses

[@DrJessicaLouie]

Are you inspired to retire early? What is your FIRE goal? Please LIKE this video and SUBSCRIBE to the channel for weekly advice. Cultivate joy my friends!

[@briankfung]

So glad to see more content around Fat Fire! Sounds like you guys do quite well on both the income and expenses side! I could certainly work on doing more to increase my expenses. Thanks for sharing!

[@DrJessicaLouie]

Thanks Brian! Your video on FAT FIRE was amazing! Did you plan out your financial goals for 2022?

[@ryanchinh1040]

i achieve my fire movement this month i told my manager i quit my job. i say i have enough money last for the rest of my life. i am 34 years old now it took me 16 years to achieve financial independence retire early.

[@DrJessicaLouie]

Congratulations Ryan! Is there a piece of advice you would like to share that you've learned from your own journey the last 16 years?

[@Hungry4mor3]

So glad I found your channel. My Fiancé and I are health professionals and we are excited about FatFire. Thanks for this information!!

[@DrJessicaLouie]

Wonderful to hear you are working towards financial freedom Singhston! Please reach out with questions along your journey.

[@jackchen5290]

How do you get saving rate to 70-85% in California? For married couple with $500k ($150k+$350k) income, you pay $19k to FICA, $39k to California franchise tax board, $113k to IRS for a total base tax of $171k or about 34% of your income after deduction. Even if you own your house and don’t pay rent, your local county property tax should add another $10k to your tax bill bringing you up to a 36% effective tax rate. 70% saving rate doesn’t sound remotely right when 35% has to goes to taxes. If you are talking about saving 70% after tax, your saving rate drops to a more pedestrian 46% (65%x70%) saving rate. 401k does help when your marginal tax rate is high. In the case of a $500k income they can save about $17k in tax assuming they max out the contribution.

[@sallyrafie7836]

Great topic! I didn’t know about the 5 different types of FIRE 👍🏽

[@DrJessicaLouie]

Thank you Sally! Are you pursuing your own financial independence journey?

[@raytas9140]

I can’t wait till I’m able to achieve financial independence

[@DrJessicaLouie]

Thank you for watching Ray! Do you have a timeframe to achieve your goals?

[@abbca9854]

Thanks for this. Love the channel. A couple questions based on assumptions. 1. How are federal and state taxes factored into your fatFIRE equation? 2. The cost of living in California is off the charts, especially housing. How are you factoring that in when you buy a house, are all the costs fully accounted for? 3. Offering this up from a position of trying to help. I hope the Lord blesses you with kids. In my experience, they are not linear expenses nor a spreadsheet entry that is fully predictable. It took us 7 years to have kids as one example. If a child has special needs, that ramps up costs significantly. College costs are through the roof. So alot of variables to plan for... 4. 7% of annual return feels like a non conservative estimate coming off 20 good years here (feels like the right number the last 20, not the next 20). One aspect of your calculation may need to include inflation impact. For example, a gallon of gas costs alot in California as does food like eggs. How that inflation translates to overall net worth and SWR is important.

[@DrJessicaLouie]

Thank you for watching! Further details are coming in upcoming financial independence videos this year. I do pre-tax and post-tax savings rates to factor in taxes. Yes, the housing costs are factored in for owning a home in the 7-figure range. Yes, family costs vary - we will have 529 plans and custodial accounts to build generational wealth. We shared how we paid off massive student loan debt in a separate video. Yes, inflation can be factored in depending on your withdrawal and annual return rate.

[@TinaLeder]

Very helpful.🙏

[@DrJessicaLouie]

Thank you! Are you pursuing your own financial well-being journey?

[@martinlindgren4490]

Very usefull and interesting. I´m on the FIRE-journey too and the clip is very encouraging. I never had FAT fire as a goal (at least if according to the definition in this clip) - my annual cost of living is quite low even without cutting any expences. I made a timetable when I reach the different FIRE-levels based on 3 or 3,5 or 4%. I´ll reach "plumb-fire" in 5-6 years. Then I can live on 3% without cutting any expences.

[@JamesClark]

I'm not sure I understand Fat Fire at living expenses of $100,000+/yr. I live alone in a downtown area of a major city and my cost of living is only $43,000/yr. I've been on the Fire path 9 years and am trying to decide whether to keep working for 7 more years or possibly only 2 more years, or maybe less.

[@DrJessicaLouie]

Hi James, great to hear you're also pursuing financial freedom. Everyone's FIRE journey is different. We all have different desires that align with our expenses. The example in the video takes into account owning a 7-figure home (housing expense of $70K+/year), electric car, a family and keeping certain luxuries in a HCOL area.

[@artmania2239]

Wow well done and great info

[@emilyencapsulated9540]

Love this and your channel, Jessica! I'm an NP student, so a lot of your content resonates with me. I'm really thinking seriously about how to avoid burnout in healthcare and how I can set myself up for the future. So wonderful to hear you talking about financial freedom for healthcare professionals ✨

[@DrJessicaLouie]

Thank you Emily! Great to hear you are taking preventative action around burnout and stress in healthcare. Do you have goals set-up for your financial well-being and mental health for 2022?

[@emilyencapsulated9540]

@@DrJessicaLouie I'm trying to pace myself as I finish my last rotations & didactic. I really want to prioritize exercise, eating well, & *sleeping* enough in 2022. And to do that, I need to say "No" more often😉 I'm also looking ahead and planning a solo vacation for 2023--it will be my first vacation in 4 years!✨ And I've already budgeted everything out based on NP salaries in my area👍

[@fjcardenas1]

Emily.. all you need to do is find a rich spouse like Dr. Jessica. Numbers are unrealistic for 99% of people.

[@CaptainPicardy]

I am confused a bit about your Fire calculations. If you want to live off of 4% each year, then multiply by 25. But, 3.5% requires x 28. If you want to take less each year from your assets to live on, then you need even more money saved?

[@CaptainPicardy]

I think those calculations are meant for how many years your assets will last (4% = 25 years) (3.5% = 28 years).

[@ralflofstad]

No, she’s right (sorry for chiming in one year after 🙂). The numbers 25, 28,5 and 33,33 percent are simply the withdrawal rates calculated in reverse: If your living expenses are 40 000 dollars a year, and you intend to withdraw 4 percent of your portfolio, the portfolio needs to be 1 million dollars. You arrive at the same number by multiplying your 40 000 dollar living expenses with 25. If you want to lower the withdrawal rate, then your portfolio has to be larger for you to still cover your expenses, assuming they are the same as with the larger withdrawal rate.

[@muffemod]

Mr. Money Mustache chart is misleading. Look at the last row. 100% savings rate = zero years. Even if you made a $500,000 salary and saved it all it wouldn't be enough for lean fire ($40,000 annual expenses).

[@soumyaburugu]

Savings rate is 100% meaning your expenses are 0% (not 40k per year, if you are spending 40k per year then you are not saving 100%). MMM meant if you were living for free for whatever reason and that if you will continue to live for free all your life then whatever you earn will be saved, hence you can retire anytime now. It's not realistic situation but for math's sake it is a plausible situation.

[@muffemod]

@@soumyaburugu Right I get that. But just like the 4% rule is a generalization, MMM chart is an estimate at best. The reality is the math behind safe withdrawal rates is much more complicated than the math behind the accumulation phase. The chart is a bit misleading in the sense that "shockingly simple math..." couldn't be further from the reality. It's can be a quick reference, but I'd highly recommend one plugging their PERSONAL numbers (not just a savings rate) in a more robust calculator.

[@leahmcdermott4189]

These incomes are ridiculous! 🤯🔥. You guys are rich rich 😂🤑

[@DrJessicaLouie]

Hi Leah, these are examples from median salaries after 9-14 years of training into each profession and a lot of student loans.

[@fjcardenas1]

I agree this is unlealistic to 99% of people. You can save 70-80% of yiur salary because your physician spouse makes enogh to cover expenses for multiple median income famies.

[@aaronbargotta]

Hi Jessica, when you were running your FIRE number at 12:16, we’re you using a pre-tax or post-tax savings rate of 70-85%? Thanks!

[@jackchen5290]

That cannot be pre tax. She and her husband should be paying at least 34% in taxes (FICA, IRS, california franchise tax board, Los Angeles county) in the best case scenario assuming they don’t pay rent and mortgage or professional license fee. An honest accounting of FIRE has to account for taxes, often the biggest expense by far and a major impediment to achieving FIRE.

[@terryterry7409]

You are beautiful