This Is Where It Starts
A starting point for anyone new to financial independence, and a reminder for those who aren't
My first real financial decision was signing up for a high-interest credit card because they were handing out free t-shirts. It wasn’t a smart move. Most of us start that way, making decisions before we fully understand what we’re deciding.
I’m still working through a lot of this myself. I suspect most people are, even if it doesn’t always look that way from the outside.
If you’re new to thinking about financial independence, often referred to simply as FI, some of what I write here will feel more advanced than where you are right now. That’s okay. A lot can still be learned by working through ideas that challenge you, even before you fully understand them.
Whether you’re just starting to think about this or already watching your savings grow, that uncertainty is more common than you’d think.
Save consistently. Invest well. Watch the number go up. There was a certain comfort in it. It felt like progress, even on the days nothing else did.
And for a while, that was enough.
But at some point, I started expecting that progress to give me clarity. That as the number got bigger, the decisions would get easier. That I’d feel more certain about what I was working toward.
That never really happened.
If anything, the questions got harder. I wasn't asking how much to save anymore. I was asking what it was all actually for. How I’d use it. What I’d change. What I wouldn’t.
Because the number, on its own, doesn’t answer any of that.
What the Number Actually Is
If you’re new to financial independence, it helps to understand what people mean when they talk about a FI number.
Financial independence means your investments generate enough income to cover your expenses without needing to work. The calculation most people use to find that number is straightforward:
Take your expected annual expenses in retirement and multiply by 25.
If you expect to spend $60K a year, your FI number is $1.5M. If you expect to spend $100K, it’s $2.5M.
That multiplier comes from the 4% rule—the idea that you can withdraw 4% of your portfolio each year without running out of money over a long retirement. The 25x calculation and the 4% rule are two ways of expressing the same thing. A portfolio 25 times your annual expenses supports a 4% annual withdrawal.
When most people run this calculation for the first time, the number that comes back feels impossibly large. That reaction is normal. Part of what makes it feel so large is that calculators often show future dollars rather than today’s dollars, accounting for inflation over the years between now and when you’d retire. A number that accounts for 20 or 30 years of inflation will always look larger than what you’d need if you stopped working today.
The other thing that makes it feel large is that it’s built entirely on assumptions: what you’ll spend, when you’ll retire, what returns you’ll get. Change any one of those and the number changes with it. That’s not a flaw in the calculation. It’s just what happens when you’re trying to plan for something that’s still years away.
The goal at this stage isn’t to get the number right. It’s to understand what’s driving it.
Why the Number Is Just the Starting Point
The 25x calculation is useful because it’s simple and gives you something concrete to work toward. But it was designed to answer a specific question under specific conditions: how much do you need if your spending stays flat and markets behave like the worst historical periods on record?
That’s not the same question as how much do you actually need for the retirement you’re planning.
A few things the basic calculation doesn’t account for:
Spending tends to change across retirement as health and priorities shift.
Other income sources like Social Security or a pension reduce how much your portfolio needs to generate.
What you think you’ll want later may not match what you actually want when you get there.
This is where the calculation starts to feel incomplete. Not wrong, just not the whole picture.
That’s where this started to shift for me.
I began to realize that financial independence isn’t just a finish line. It’s a set of decisions. Ongoing ones. And those decisions are connected in ways you don’t always see when you’re focused on a single target.
That’s what I mean by the FI equation. Not a formula you solve once. Something you’re constantly adjusting as your life, priorities, and resources change.
I'm writing this because I think a lot of people are doing the hard part really well. They're saving. They're disciplined. They're thoughtful. And still unsure. Something is missing. Not a bigger number or a better strategy. A way to connect the pieces.
If you’re just starting out, the calculation above is your first piece.
If this helps you see those connections a little more clearly, or make better decisions along the way, that’s enough.
— Brad
Ready for the next step? Continue here. It gets at the feeling most people have when the progress is real but the clarity isn’t.
Or read more at The FI Equation.
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This is meant to help you think through financial decisions and tradeoffs—not tell you exactly what to do. It’s general in nature and not personalized advice (see full disclaimer).