Shaping your path to FIRE


Creating projections

I like the idea of making projections about when things will happen and planning in advance. I have recently been working on a timeline to FIRE (Financial independence / Retire Early) so that I can at least have a rough idea as to when I might achieve this. Like any model used to predict an event, the accuracy of it is dependent on the inputs. The more variables you try to capture, the more closely it resembles what is likely to unfold. Then there is of course the need to update it as time goes on and new information becomes available. Life can’t be predicted, so a timeline to FIRE can never be 100% accurate but it at least gives you a good guess…

When I began to plot out my timeline to FIRE I at first I started with a very basic methodology using a standard savings rate target and investment return. There are actually some basic online calculators which are handy for this and initially I did it assuming a status quo lifestyle in which things are unchanging and exactly as they are now. I’m single and have no dependent at the moment.

The parameters and the balance between being frugal and enjoying life

I initially estimated my savings rate for 2018 to be 22% although I have a target savings rate of 50% for 2019 onward. Using an after tax income of $ 54000, I assumed $ 27000 of expenses and $ 27000 of savings per annum.

The redraw rate will be 5% and the average annual interest on savings/ investments will be 5%. I started the simulations at 2019 at age 31. Without further ado here are the results….

Age Year Savings Interest Total
31 2019 27000 1350 28350
32 2020 27000 2768 58118
33 2021 27000 4256 89373
34 2022 27000 5818 122192
35 2023 27000 7460 156652
36 2024 27000 9183 192834
37 2025 27000 10992 230826
38 2026 27000 12891 270717
39 2027 27000 14886 312603
40 2028 27000 16980 356583
41 2029 27000 19179 402762
42 2030 27000 21488 451251
43 2031 27000 23913 502163
44 2032 27000 26458. 555621
45 2033 27000 29131 611752

fire timeline 1

Sweet, I can give up my day job in only 15 years’ time, since at this point in time the nest egg I have can cover my expenses without drawing down on it.

Looking ahead

But then I began to think more deeply about the subject and began realising that there are actually certain events in life which can seriously impact a projected timeline.

As someone who is looking down the track at marriage & children, I have recently been considering the impacts this might have on my financial future. A basic projection doesn’t factor things like this in and I decided to have a go at incorporating these life choices into a projection.

I’ll basically assume that as a couple/ small family the expenses will be $40000 per year. To calculate net income I’ve assume an after-tax figure of $ 80000, so I would keep the savings rate of 50% intact.  I used the same methodology to then recalculate the projections. I understand that many would question using only $ 80000 after tax income for a couple, and so the projections are probably overshooting the time required by a bit, but things rarely go do go to plan and a 50% savings rate is a bit of a stretch also.

I think a more accurate way of looking at the whole problem would be to realise that the costs assumed can range and use the ranges to create upper and lower bounds but I’m simplifying here by just using rough estimates.

Without further ado, here are the results…

Events that really shape your FIRE and their impact in years

  1. Marriage

Marriage is quite expensive. First there is the engagement ring. There are rules of thumb on how much should be spent – 1 or 2 times your monthly wage seems to be the norm. In Australia it sits on average at around $ 5000, in the US it’s about $ 6000 and in the UK it’s about 1500 pounds.

After this there is typically an engagement party, although this is usually pretty simple and unlikely to hurt the hip pocket too much. Then there is the case of the wedding ring. Some couples spend just as much on this or get simple bands which are much less than the engagement ring cost. This is probably around $ 1000 in Australia.

The expensive part is the wedding. This will set you back on average $ 36200 in Australia, 35000 pounds in the UK or $ 33300 in the US.

Taking a rough estimate at $ 40,000 overall, I can analyse the effect on FIRE.

fire timeline 2

This basically extended the time by 1 year. Financial independence was achieved at 46 rather than 45. To be honest, adding 1 extra year to achieving FIRE is not really a big deal. This is an important event in life which is worth celebrating and spending money on.

  1. Children

The cost of raising a child from birth until they are educated is $ 406,000 according to this site. There are an array of costs to consider with the largest being child care and education. The average cost of child care is around $ 100 a day in Australia, with some centres requiring up to $ 170 although there is a rebate based on income. The other big expense is education, which is crucial in creating opportunity within the workforce and some private schools can cost more than $ 30000 per annum in fees.

To analyse the impact of this I decided to put the cost of a child at $ 400,000 total, which over approximately 20 years gives $ 20,000 per year. I recalculated based on having 1 child @ $ 20000 per year.

fire timeline 3

After this I recalculated based on 2 children @ $ 40000 per year.

fire timeline 4

Financial independence now occurs at 53 for 1 child, an extension of 8 years, and 65 for two children, an extension of 20 years. Three children would only be possible if the costs were reduced and/or income was increased.

This has a massive impact on FIRE but there are decisions that can be made to reduce costs and harmonise having kids with financial goals. When it comes to schooling, spending massive amounts of money on private schooling may not necessarily yield a superior outcome for a child’s future. There are probably more affordable schools which can still give them a great education and set them up for promising careers.  Child care is expensive and there are cheaper solutions – “family day care” is one that I’ve heard of.

Keeping a modest lifestyle

According to the data I actually have a low savings rate and I think I can find areas where I can trim fat and boost my savings. For this reason I’ve started a strict record of all expenses and began cutting back on unnecessary items where I can.

At the same time I’m vigilant of not forcing myself to be frugal to the point of self-imposed misery. It’s great to save but you have to have a life as well. There’s a saying that “you don’t need money to be happy” – I’ve heard a rebuttal to this once or twice – “Of course, but it sure does help”. As much as I don’t like to admit it, money does have an impact on quality of life. Everything costs something. Although I intend to become more frugal and tighten my belt on expenses, I realise I must be balanced and seek a path of moderation.

Accuracy of Projections

How accurate will these projects be? Are these figures for estimates on marriage and cost of living with a family of these sizes correct? They’re hard questions to answer….

After having done these projections I at least feel like I have a better idea of the financial impacts of marriage and children. Ultimately, kids are expensive but this doesn’t really deter me to much from having them. Ultimately I’m prepared to add time till FIRE to have them. Ideally I would delay having children as long as possible in order to at least build the nest egg a bit first. However, at the ages my partner and I are at, if we did end up getting married and had kids, it would have to happen sooner rather than later.

Creating a timeline is a bit of fun

Have you created a projected timeline to FIRE? It can be a fun activity and at the very least will get you thinking about your future and planning in advance… If you’re interested in creating a timeline like this, then the calculator at Networthify is a great start.

Best wishes to those of you who are on the path to FIRE!


Founder of

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