In 2014, I learned about financial independence, and I realized that I no longer had to save for retirement.
I had done a good job of doing so for nearly a decade with an anesthesiologist’s salary, and thanks to an early bear market followed by a lengthy bull market, I could afford to retire and maintain our lifestyle indefinitely.
That’s not the path I chose. I worked as an anesthesiologist for another five years and started a blog that became an online business that has largely replaced the income I had when I was outfitted with scrubs and a pager.
How did I know I had saved enough? A rule of thumb we often use in the financial independence (FI) community is that you should have a minimum of 25 years of expenses saved up before you can call yourself FI and afford to retire early (RE).
If you never earn another dime, you can retire and draw 4% of your nest egg that first year in retirement and spend a similar inflation-adjusted amount each year thereafter, and you’ll have a low likelihood of running out of money.
To determine whether or not you’re truly FI, you must know how much you have and how much you spend, or, more precisely, how much you expect to spend once you’re no longer working. Some expenses will go up, and some will go down.