Financial Independence & FIRE Calculator • | by I Am Net Worthy

Financial Independence and the
FIRE Calculator

Achieving financial independence is possible no matter when you start. Learning the main concepts and using the calculator will help you create a specific plan, so your path to early retirement can be shorter.

Use the FIRE Calculator

Why Everyone Pursuing Financial Independence Needs Solid Financial Education

Simply put, financial independence occurs when you no longer have to work, because you have the financial resources to pay all of your living expenses. The goal for many is to retire early, and that means setting up a retirement account that goes to work for you in the name of compound interest.

The bathtub model is one you want to live by. The Net Worthy plan considers the water level in the tub your financial power. More water equals more financial power. Your income is what fills the tub while your expenses drain it. The key to financial independence is to have more coming in than going out. The excess should then be funneled into long-term investments aimed at generating passive income. This could be the aforementioned retirement account with compound interest.

What Is FIRE?

FIRE stands for Financial Independence, Retire Early. The goal is to acquire enough resources, through savings and investing, literally putting your money to work for you so you can stop working when YOU want to. In the end, you’ll have a solid financial future and the freedom to do what you want to do when you’ve reached your goals.
Many people do continue to work after achieving financial independence, but that’s by choice. They’re free to do what they want to do, rather than being tied to working for the man to pay their way.

FIRE concepts

Why YOU Need to Use a Financial Independence Calculator

Personal finance education benefits everyone, regardless of age and earnings. There are always tips and tricks to learn about how to put your money to work for you. The sooner you figure out what works and what to avoid, the better off you’ll be for retirement. With a FIRE calculator, you get an overall picture of what needs to be done and how starting sooner can set you up for financial security. A financial independence calculator will also help you set the best plan if you’re starting late.
Having the full picture in front of you is a real motivator!

The Bathtub Model

It sounds funny, but the easiest way to envision your financial independence is to visualize a tub full of water. Income pours water in, expenses drain the tub. Therefore, to fill it up, you need more money coming in than going out, easy right? Maybe not in the beginning, but as you make your way through the Net Worthy resources, you’re bound to find a way.

4% Rule

The 4% rule is simple: this is how much you’ll likely withdraw from your retirement portfolio each year in order to live comfortably. If you’re determined to live out your golden years in luxury, you’ll likely want a higher withdrawal rate, but you’ll have to increase your savings rate as well. The financial independence calculator can help you come up with figures for planning.

Save Now for Future Benefits

Putting money away, then using it for either long term investments and passive income sources is the only way you’re going to achieve financial independence and retire early. It can be tough to figure out where to cut corners, but if you really look at your budget, you can probably find an area — or two — where you can lower your expenses.

Eliminate Debt

Get rid of your existing debt as quickly as you can. The debt will count against you come retirement, and the last thing you want is the money you put to work to go to others. Debt is like negative compound interest.

Emergency Fund

Saving for a rainy day is a must! With 40% of adults saying they could not afford an unexpected expense, it’s more important than ever to have money set aside. Saving now will ensure you don’t spend more in loan or credit card interest for these expenses.

Foot on the Gas, Not the Brakes

When it comes to eliminating debt and investing, it’s easy to get caught up in doing both. This is referred to as having one foot on the gas and the other on the brakes – you’ll damage your engine and get nowhere fast. Prioritize your debts — other than your mortgage — and then invest. You’ll get quicker results.

Passive Income Sources

Passive income is great, because you’re making money without taking action — other than investing. Your money goes to work for you and you simply reap the rewards — the financial independence to do what you want, when you want.

This Tool Spells Out Financial Independence for You

The beauty of the FIRE calculator is that it does all the work for you, so you can put away your pencil, paper and stop trying to do the math in your head. Here are the benefits the FIRE calculator offers you:
  • It's easy to use. Simply plug in your age along with a few figures and you'll get a result every single time. If you don't like the numbers, or you want to see different scenarios, you can simply change the figures and see new results.
  • It's FREE! You can visit this tool over and over again. Try it for yourself then share it with friends and family. Everyone should aim for FIRE.
  • It's based on real information. Compound interest is tricky to figure out, but our FIRE calculator uses the most realistic rate of return (averaged over a 40-year period). In case you're wondering, right now that's 10%.

How Does the FIRE Calculator Work?

This financial independence calculator works by taking your age and weighing it against your current savings/debt ratio, along with your savings and anticipated withdrawal rates. It predicts how much you’ll be able to retire with at your specified age given the expected rate of return and accounting for inflation.
Given all the figures you plug into the FIRE calculator, you can measure your real return rate — your expected rate of return adjusted for inflation — and determine whether your plan is feasible or if you’ll need to invest more to accommodate your desired lifestyle.

FIRE Calculator Tool

Getting started is simple. Input your age, starting point and other factors to see when you’ll reach your financial independence goals.

Featured Chapters

1 – The Million Dollar Plan

Discover step-by-step what goes into making a million dollars and learn the basics in an easy-to-follow plan. This introductory chapter sets the pace for the entire Net Worthy series. Download

2 – The Three-Phase Path to Financial Independence

Three phases: red, yellow and green. These define your path to achieving financial independence. Debt, savings, investing and emergency funds are covered in depth. Download

7 – Long-Term Investing

Whether you're new to investing or an old-hat, this Net Worthy chapter covers different types of short- and long-term investing. Topics include, but aren't limited to 401(k)/TSP accounts, target-date funds, traditional and Roth IRA accounts. Download

Endorsements

“Chris Smith’s Securing Your Financial Future is an easy to understand and enjoyable primer that shows young adults how to create a strong financial foundation for, as the titles says, a secure future”

Melissa Tosetti

Author of Living the Savvy Life

“Were I to recommend justone book for a young person starting his or her financial life, Chris Smith’s Securing Your Financial Future would be it. It will improve both the peace of mind and bottom lines of its recipients, and it may even make them better people”

William J. Bernstein

Author of The Four Pillars of Investing and The Investor's Manifesto

“Chris Smith’s Securing Your Financial Future is an easy to understand and enjoyable primer that shows young adults how to create a strong financial foundation for, as the titles says, a secure future”

Melissa Tosetti

Author of Living the Savvy Life

“Were I to recommend justone book for a young person starting his or her financial life, Chris Smith’s Securing Your Financial Future would be it. It will improve both the peace of mind and bottom lines of its recipients, and it may even make them better people”

William J. Bernstein

Author of The Four Pillars of Investing and The Investor's Manifesto

Melissa Tosetti

Author of Living the Savvy Life

William J. Bernstein

Author of The Four Pillars of Investing and The Investor's Manifesto

Melissa Tosetti

Author of Living the Savvy Life

William J. Bernstein

Author of The Four Pillars of Investing and The Investor's Manifesto

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