Are we there yet?

We haven’t achieved FIRE as you probably guessed from the title, a premature FIRE experiment. If you’re unfamiliar with FIRE there are plenty of good sources of detailed information on that topic. I will only provide some very basic info to set the stage. To put it simply, if you save and properly invest 25 times your annual expenses, you can live off those investments for 30+ years. Your progress toward fire can be measured in units of fire, where you need to accumulate 25 fire units (FUs) to hit financial independence. In our current location which is a medium-high cost of living city in Colorado, we have 22 FUs.

Wherever you are at on the path to FIRE, there are levers to pull that can dramatically accelerate or slow your progress. Increased spending through lifestyle inflation is one negative lever that will move you backwards. Increased frugality is a positive lever that will move you forward. My family of four has been tuning our budget for years. Working to get to the optimal spending that is low but feels sustainable indefinitely. If we wanted to reduce our budget further we could, which would get us to the necessary 25 FUs. The lifestyle supported by that is not how we want to live month after month though.

Fast Forwarding FIRE

The lever which we are going to pull is a dramatic one. However, it isn’t totally or even mostly with FIRE purposes in mind. We have decided to forge ahead and quit our jobs, take the kids out of school, and travel internationally for a year. On the surface that would seem like breaking the glass cover to push a red danger button rather than pulling a favorable lever. However, this actually crosses us over 25 FUs when the whole picture is considered.

On the expenses side of things, traveling internationally will be 41% more expensive than our normal life. It’s the income side of things that is most dramatic though. We will be renting out our paid off house, which will put to work the money trapped in our home equity in a different way. In our day to day life that equity acts as a subsidy that reduces our expenses. However while traveling it will produce real income. To put this in terms of FUs, our investments will only cover 16.5 units while traveling. Rental income produces another 9.4 units, taking us to almost 26 units.

Avoiding FIRE Failure

We will have plenty of opportunity to make this plan cheaper if necessary. Current plans include a mix of expensive (e.g. Tokyo) and low cost (e.g. Cape Town) locations. Simply by spending more time in lower cost areas we could keep our FUs afloat. This margin for error to stay above 25 FUs (aka 4% withdrawal rate) should allow us to continue this international adventure indefinitely if we choose.

The reality is we only plan to travel for one year though. That may present a different problem; we could return to find that we are still at 22 FUs or less in our normal life. What do we do then? Do we cut costs? Do we go back to work? We’ll worry about that when the time comes. If we try to solve that now we are just planning around the unknown.

Ultimately An Experiment

Will this plan work in reality? I think so, but it’s impossible to predict with certainty. We have spent countless hours calculating costs, including all expenses necessary to do this in a safe and sustainable way. There aren’t any guarantees though as some factors such as market crashes, bad renters, and health emergencies are out of our hands. If we wait for a perfect situation this will probably never happen, and it sure sounds like a fun adventure to break up the day-to-day monotony.