I was reading Money Flamingos blog post Flamingo FI that really put words on an approach to financial independence that I have been thinking about a lot lately. The traditional approach to FI (if there is such a thing in the financial independence world) is to work hard and save most of your income during number of years to put enough money in your money making machine so that you can live of the capital income. Financial independence is one of the corner stones connected to our big picture plan of having a homestead on the woods. Although I really want to get to FI fast it is a careful balancing act to enjoy the present and not deprive ourselves whilst working towards our longterm goal. After the initial holy s** this whole concept just turned my view of the world upside down has landed and you have got your structure for saving in place you realize that 10-15 years is a long time. It is too many years away to just go through the motions of fulltime work and waiting for us to hit our FI number. The whole FI concept has drawn us in because we want to be more in control of our time and I don’t want to wait until we have reached our FI number before creating a life that fulfills me. So the flamingo FI approach resonates deeply with me.
Part 1 – Accumulation
This is the phase where you buckle down and work full time whilst being frugal and investing your money to create your FI nest egg. This accumulation stage isn’t as long as if you were saving up to full FI. Instead this phase ends when you have saved around half your FI number and moves you on to the next phase.
Phase 2 – Semi retirement (part time work)
At this point you can decide to reduce your percentage of time spent working because you only need to earn enough to cover your monthly expenses. During this phase the nest egg will continue growing (albeit at a slower rate) in the background without more money being put into it. If you do end up earning more than your expenses you can keep adding to the nest egg and speeding up the time until you get to the next phase.
Phase 3 – Financial independence
When the nest egg has doubled in size you have reached financial independence and working becomes optional. Now you can decide if you want to stop working completely and retire early or pursue other passions without the worry of a paycheck. If you enjoy your job and want to continue working financial independence gives you the power of knowing that you can quit any time you want and that you don’t need to work for money. In this phase you will live off the capital income from your investments or if you continue working your nest egg will keep growing.
Phase 4 – Traditional retirement
If your have a government pension system like in Sweden (if there is still a possibility of getting it when you get to the right age) you will be able to upgrade your lifestyle somewhat since you will be getting extra money every month. Another option can be to start withdrawing more money from your nest egg so that it will shrink in size over the remaining years or if you want to pass on the nest egg to your children you can keep withdrawing like in phase 3.
I love this approach because it lets you gain more control of your time earlier. I have always felt that there is more to life than working full time. I don’t need lots of money so that I can live a life of excess instead I would rather have more time and live with less. I enjoy my work and don’t have a problem with working I just don’t want it to take up so much of my time. Therefore the second phase fits in perfectly in our plan for the future since I want to spend more of my time doing other things for example working in our homestead. Mr LIL really enjoys working so he will probably keep working full time longer than me but who knows he might get super inspired by the homestead and want to put more time into that or finds some other project he wants to do. Either way through saving aggressivley in the accumulation phase we will have created the freedom to choose what we want to spend our time doing. And with the nest egg growing in the background we will still hit our financial independence number just a couple years later than if we were rushing towards FI. All the difference will lie in the journey to get there which will be so much more enjoyable so it doesn’t matter if it takes a couple years longer. So this will be how we lay out our journey to FI where our accumulation phase will be around 5 more years depending on our savings rate and the market (so 6 in total since we started our journey around a year ago). That is a timeline that feels so much easier to keep to and also gives us enough time to prepare for our next phase.