Understand Your Expenses To Reach Your Financial Independence Goals

As long as you're spending less than you take in income, you're doing just fine, right? For the most part, yes. Some people live their lives this way, but we've set very intentional goals for ourselves. To really understand where your money is going, you need a broad view of your yearly expenses. There are plenty of things that can happen from month to month, so taking one or two months of budgeting and extrapolating that into 12 months isn't exactly the best thing to do. Life is much more bumpy than that. The last 12 months has been a good test of what our FI number realistically could be. We have kept records of our expenses and we now have a year's worth of data to prove to ourselves that we can do it.

Based on our 2020 numbers, we can live very comfortably on $60,000 of net income (after tax). This further supports the idea that $1,500,000 is our true FI number. We know that our yearly expenses will change as we have kids, but that should not change our FI number too much. Keep in mind that this is with the assumption that in 20 years or so, our kids will hopefully be in college or have their own lives. The two of us can be retired and give our lives to the best and most meaningful work that we can find. I suspect that our lives won't be that straightforward, but it's fun to think about!

Anyhow, I don't want to bore you with the things we spent our money on, but our expense aren't really a surprise to us. Our biggest expenses are housing, food, utilities, and.. gifts! All of these things can be modified if we are willing to change. We always want to be as flexible as we can and do what we can to reach our goals.

I do want to reiterate the importance of having a budget, being diligent about sticking to it, and being intentional about saving for the goals you have for your future. Having these numbers is incredibly important to see where you can cut out some fat and plan for the future. There are so many advantages to doing this, and it only takes a few minutes each month. There's something to be said about having just 1 credit card or writing everything down as it happens, to simplify this process! Do what works best for you!

Camilla and I have a lot of tweaking to do after we get married, and we hope to update you next year with some of those numbers (especially since she will finally get to move in with me!), but we are confident we can get our yearly expenses down to $50,000. If we can live comfortably on $50,000 a year (i.e. not feel like we're depriving ourselves of a good life), then our FI number changes to $1,250,000! What a big difference that is!

So whatever your goals are, we hope that you have a clear vision for it. We hope that you are fired up about it. We hope that you continue to join us on our journey as we figure this all out. And we hope that you are pursuing your own version of Financial Independence! We know that you can do it, and we're here to help.

Confidently yours,

Khang