We started to get really serious about reaching Financial Independence in early 2016. We soon realised that the “traditional” path to Financial Independence would take us more time than we were willing to sacrifice. On top of that, we are not planning to retire from work completely; we just wanted to retire from the rat race. Once we took this into consideration it became clear that we don’t have to wait until we reach our FIRE number. This is why we came up with the concept of Flamingo FI – it gets us out of the rat race in just a few years and we will still get to FI eventually.
We will retire from our full-time jobs in early 2021 – 1000 days from start of this blog. You can follow our progress towards our goal in the “Project 1000” section of this website where I will post a monthly update.
Our plan is – obviously – to follow the four lifestyle phases of Flamingo FI:
Phase 1 – Accumulation:
This is the phase we are currently in. The goal of Project 1000 is to complete this phase by early 2021 – around 5 years from when we started getting serious about FI.
In order to reach Flamingo FI we will save 12.5x our future annual living expenses. We are on track to reach Flamingo FI in early 2020, so technically, we could quit our jobs right then and there. However, we have decided that in addition to the Flamingo FI nest egg, we will save cash in three separate buckets to make our life as easy as possible once we semi-retire. We will discuss this in more detail below.
Phase 2 – Semi-Retirement:
In this phase we won’t be actively adding to our retirement nest egg. This means that we will able to downshift and work in a much lower capacity. The goal during semi-retirement will be to pay for our ongoing living expenses only, so a part-time job will do. Alternatively, we might work full-time for 2-3 months out of the year and then take the rest of the year off. Or we might also start our own business, who knows!
We will stay in this phase until our nest egg we accumulated in phase 1 has doubled. At this point, we will have reached FIRE and could choose to stop working altogether, but we think that’s unlikely. In addition, we will sort out our housing situation during this phase. Our projected future living expenses that our calculations are based on do not include housing. We currently rent and are undecided whether we want to buy a cheap home or not. This decision depends on where we will end up moving after we leave the rat race. One of the additional “buckets” from phase 1 (see above) is a lump sum that we can a) use as a deposit or b) invest and wait until it has grown enough to pay our rent for life.
Phase 3 – FIRE:
No explanation needed!
Phase 4 – Traditional Retirement:
If we feel like living it up a little more when we are old, we might decide to draw down our nest egg once we hit traditional retirement age (5-6% annually).
A quick note on our numbers
- We do not use dollar figures when we talk about our numbers. Instead, we measure our progress in time. It’s not about dollars. It’s about freedom. Allan Roth writes “In actuality, a much better way of measuring wealth would be the number of years of financial freedom that is accumulated.” I completely agree. What really counts is not how much someone has in the bank but how many years of freedom these savings can buy him or her. Using time instead of money as a measurement allows you to compare your progress to that of others – even if their living situation is completely different to yours.
- Our current living expenses have nothing to do with our future living expenses. We currently live and work in Sydney, where the cost of living is outrageous. Once we quit our full-time jobs we will move somewhere more relaxed and affordable (most likely abroad or to a cheaper area of Australia). Our calculations are based on our estimated Future Annual Cost Of Living (FACOL – isn’t this a great acronym?).
Our savings goals in detail
Here is a breakdown of the different buckets we need to fill before we quit the 9-5:
- Flamingo FI (our retirement nest egg) – 12.5x FACOL (=Future Annual Cost Of Living)
- Lump Sum – 2.5x FACOL – we will likely use this as a deposit for a home or our personal “housing fund”.
- Emergency Fund – 0.75x FACOL – just a good old-fashioned emergency fund for… well, emergencies.
- Headstart fund – 1.5x FACOL – this will cover our living expenses for a while. This will allow us to settle into semi-retirement and figure out what we want to do without any financial pressure.
Head over to the Project 1000 section to see our starting point and follow our progress!
Target asset allocation
- Real Estate: We are planning on investing in property soon. We don’t have too much experience with investment properties and have a lot to learn, so this will be an interesting exercise. Target allocation: 40%
- ETFs/LICs: We currently own some individual shares and also receive bonus shares through our employers regularly. However, we are planning to sell these when the time is right and build a portfolio of index ETFs and Australian LICs. Target allocation: 20%
- Super: More than half of our current retirement nest egg is invested in Super (in a mix of high growth and index funds). Moving forward we want to concentrate on building our asset base outside of Super. Target allocation: 40%
The target allocation percentages above are somewhat flexible and will likely change over time. We currently have too many funds in Super and need to build the non-Super component of our nest egg aggressively. The reason we have so much in Super is that Mr. Flamingo used to be in the military and received above-average contributions from his employer. We will concentrate on getting into the real estate market for now and will probably add the ETFs and LICs towards the end of our 1000 day journey.