The maths of freedom

The number isn't a feeling. It's arithmetic.

Most blokes I know carry a vague sense of "enough". Enough super, enough equity, enough years left in the tank. They feel it the way you feel weather, not the way you feel a bank statement. That's why they keep working until 65, then keep working until 67, then watch a mate die at 61 and finally do the maths.

I did the maths in my mid-thirties. It was uncomfortable. It was also the only honest thing I'd done with money in a decade.

FIRE (Financial Independence, Retire Early) at its core is one equation:

Your number = annual spending x 25

That's it. That's the whole movement reduced to a napkin. The 25x comes from the Trinity study, which back-tested US portfolios over 30-year retirements and found a 4% withdrawal rate survived in roughly 95% of historical sequences. Australia's market history is shorter and more concentrated, so a chunk of the local FIRE community uses 3.5% (which gives you a 28-29x multiple). I sit somewhere between, depending on the year, my mood, and whether the kids have just broken something.

Pick a real spending number, not the one you'd say out loud

Spend a weekend on this. Pull twelve months of bank and card transactions. Don't filter for "essential". Add it all. Subtract one-off costs (the new boiler, the wedding) and add a buffer for things that haven't happened yet (next car, next roof). The number that comes out is what your life actually costs.

Mine sat well above what I'd guessed. Yours probably will too.

A worked example, in AUD, for a family that lives like a normal Australian family:

• Annual spend: $120,000
• 4% rule: $120,000 / 0.04 = $3,000,000
• 3.5% rule: $120,000 / 0.035 = $3,428,571

Three million dollars. To never work again. Maintaining today's lifestyle, today's mortgage paid off, today's kids fed.

That's not a get-rich-quick number. That's a get-rich-eventually number, and it's why most of FIRE is boring.

Time-to-FI is a function of one variable

Mr. Money Mustache popularised the savings-rate table years ago, and it still stops people in their tracks. Assuming a 5% real return, here's what your savings rate buys you (years from zero to FI):

• 10% saved: ~51 years
• 20% saved: ~37 years
• 30% saved: ~28 years
• 40% saved: ~22 years
• 50% saved: ~17 years
• 60% saved: ~12.5 years
• 70% saved: ~8.5 years

Read it twice. Income matters less than the gap between income and outflow. A surgeon spending 95% of $400k will work longer than a teacher spending 40% of $90k. The maths doesn't care about your title.

This is also why "earn more" alone doesn't work. Lifestyle creep is a tide that rises with your salary. The savings rate is the only thing that compounds your freedom.

Where retire-by-50 actually lands

Let's say you're 38. You earn $180k household, you spend $110k, you save $70k a year (super included), you've got $250k in invested assets and $400k of equity in the house. You want to be done at 50.

That's twelve years. Your number, at 4%, is $2.75m. Your savings rate is roughly 39%. At 6% real returns on the invested side, you'll get there with a bit of room. At 4%, you'll be slightly short. At 8%, you'll be early. The market doesn't ask your opinion.

The point isn't precision. The point is that you can model it on a spreadsheet in an afternoon and stop guessing.

A few honest constraints

Bones I had to break in my own thinking:

• Super is part of your number, but locked. If you stop working at 50, you're funding 10-15 years out of non-super assets before preservation age unlocks the rest. This is the "bridge problem" and most people miss it.
• Inflation is real. A 4% withdrawal rate assumes you increase the dollar amount each year with CPI. The 25x multiple is in today's dollars.
• Sequence risk is the assassin. A bad first five years of returns matters more than a bad five years in your seventies. The portfolio's still there. The withdrawal already happened. Plan for it (cash buffer, flexible spending) or you'll get caught.
• Healthcare in Australia is forgiving. Medicare plus reasonable private cover is one of the structural reasons AU FIRE is more achievable than US FIRE. Don't squander that advantage.

What to do this week

Three actions, in order:

1. Write down your real annual spend. The one your statements show, not the one you'd quote at a barbecue.
2. Multiply by 25 and 28. That's your range.
3. Calculate your current net invested assets / your number. That's your percent-to-FI. Track it monthly.

That's the whole foundation. Everything else (super strategy, ETF mix, property, structures) is just optimising the route. If you don't know the destination, every road feels long.

Run the numbers. Then run them again.

Not financial advice. Talk to an adviser before acting.