On August 1, 2016, Brandon officially retired.
The 34-year-old software developer and blogger behind the Mad Fientist — who doesn’t use his last name online for privacy reasons — had been planning and saving to retire early for years.
“For the first five to seven years of my career, I wasn’t saving for anything in particular,” Brandon told Business Insider. “I was just saving because I wanted a portfolio. Then I learned about financial independence, and I was like, ‘This is perfect. This is what I’m saving for.'”
Brandon, who is married but keeps his finances largely separate from his wife Jill, an optometrist who isn’t interested in retiring, was talking about the concept of financial independence (FI) as pursued and documented by an online community of bloggers and readers seeking to save enough that they can stop working and “retire.”
Living frugally and working in rural Vermont, he managed to save and invest about 70% of his after-tax income, and saved enough to leave his job in the spring of 2014. However, when he approached his employer with the news he’d be moving to Scotland to be closer to his wife’s family, they offered to make his position remote.
That change eliminated all of the things that most frustrated Brandon about working life, like commuting, dealing with difficult coworkers, and navigating endless meetings. So he stayed on for a few years more than planned, intermittently travelling with Jill until they relocated full-time to Scotland in May 2015. There, he continued working, blogging, and saving until he retired this summer.
“It’s always been about ‘financial independence’ for me and not really ‘early retirement,'” he told Business Insider. “I never wanted to stop working, but rather I wanted to have the time and freedom to work on things that are important to me. It’s a very powerful position to be in, to be able to do things without worrying about the monetary reward, so I imagine I’ll be more productive and make a far greater impact on the world now that I don’t have to trade my time for money and don’t have money driving my decision-making.”
On Mad Fientist, Brandon offers a free, downloadable Excel spreadsheet to help others calculate when they can afford to retire. It’s not the exact one he currently uses — since he built this version in 2014, he’s made some tweaks to his own — but lays out the most important factors, accounts, and balances he’s been tracking for years. Bear in mind that the numbers in the sheet are not his actual numbers, which he does not share. These numbers are being used for example purposes only.
The blue cells are the ones for individuals to edit (on the interactive version from the website — below are screenshots that don’t accept data) to input their own numbers.
Below, he walked Business Insider through the spreadsheet:
Balances is the finances-at-a-glance tab.
Brandon uses the website Personal Capital to track his spending and saving, and inputs those numbers into his own spreadsheet.
At the bottom, he's broken out sums into liquid and illiquid totals, delineating how much of the above balances are easily accessible. 'Liquid and illiquid is for early retirees because if they have $200,000 tied up in their house, that won't be counted as income in the future and could affect their withdrawal strategies.'
Subsequent tabs draw on the information from the balances tab to make further calculations.
The chief purpose of the investment tab is 'just to make sure my allocations aren't getting too far out of whack,' Brandon said.
He includes cash balances at the top to make sure his portfolio isn't too cash-heavy, a challenge he said he struggles with to this day. 'I tend to sit on cash,' he said. You'll notice that the balance in the checking account cells (B4 and C4) aren't the same as the ones noted on the balances tab -- that's because the credit card balances have been subtracted.
His personal spreadsheet has evolved to include a column of percentages, so he can see which type of investment (real estate or total market, for instance) makes up how much of his total portfolio immediately.
Brandon breaks out the accounts by tax treatment to see which money is easily accessible and which incurs fees or penalties to withdraw. For instance, a saver can withdraw contributions to a Roth IRA at any time without paying penalties or fees, because the taxes have already been paid when the contributions were made. Earnings, on the other hand, incur taxes if withdrawn before age 50 1/2.
For the same reason, he distinguishes between before-and-after-retirement accounts. 'It's sort of high level,' Brandon said of this tab. 'A lot of my net worth is actually only accessible after retirement age.'
The net worth tab, which Brandon said is simple enough that it could probably be merged into another, is meant to provide a 'high level snapshot of your liabilities,' in his words. The net worth number is calculated by subtracting liabilities (B18 and C18) from assets (B13 and C13).
You'll notice the averages tab has a lot of blue cells for data input. That's because it's the place to track your monthly spending -- and more importantly, get a sense for how much you spend on average, and therefore are likely to spend and need in retirement.
Ideally, he preferred to see that his portfolio covered his necessary expenses, which would mean that he could quit his day job at any time, cut out discretionary spending, and still be able to cover his necessary costs.
'Necessary coverage' shows what percentage of necessary costs your portfolio would cover. In this version, it's only 69%.
'Discretionary coverage' does the same for discretionary costs, covered by supplemental income.
'Total coverage' shows how much of your total expenses could be covered by your portfolio and supplemental income combined. Once that percentage exceeds 100%, you're financially independent. If you don't plan to have supplemental income, you'd need your portfolio to cover more than 100% of your total costs.
'My strategy was to focus,' Brandon said. 'As soon as I could cover my necessary spending with my portfolio, then that gives me flexibility. I could quit at that stage by cutting out all of my discretionary spending -- it wouldn't be fun, but I could do it.'
The first step, he said, was having enough investments to cover necessary spending. Then, if his supplementary income from side projects could cover his discretionary spending, he'd be all set to leave his day job. He does highlight, however, that this balance was more important in the days before he hit his savings number.
'Feeling trapped versus not feeling trapped in your job does a lot for your happiness, so once I passed that threshold, I felt OK,' he said.
The 'required drawdown' cell 'shows what percentage of your portfolio you'd need to withdraw every year to sustain your monthly spending (based on the current month's spending),' Brandon writes in his spreadsheet tutorial. 'Once this value is consistently lower than the drawdown percentage you're comfortable with, you're financially independent!'
Brandon and Jill are planning to do a significant amount of travelling now that he's retired -- her job is very flexible -- so one way he uses this tab is to compare the cost of living at home in Vermont or Scotland versus life on the road.
The FI tab, which stands for financial independence, is probably the most important one on the spreadsheet. It draws from all of the tabs before it and annualizes monthly numbers.
Withdrawal and growth rates, in blue near the top, can be adjusted by the user.
This tab, Brandon wrote to Business Insider in an email, 'is a bit complicated, but what it basically breaks down to is how many more years will you have to work in order to pay for this specific expense in perpetuity. It takes your average spending per category from the Averages tab, uses your current net worth value from your Net Worth tab, and your growth rate and withdrawal rate assumptions on the FI tab, and it calculates how each expense adds to the number of years you still have to work.'
It's very powerful, he adds, because 'it highlights that you are actually trading years of your life for the things you buy so you can decide whether it's worth it or not (e.g. is cable TV worth another year working in a job you hate?).'
The categorized 'Years Until FI' values are added to create the total 'Years Until FI' value at the top, 'which is the main number that people care about, because that's the number of years they have to work until they can potentially retire.'
For more information on how to use the spreadsheet, Brandon put together a tutorial available on Mad Fientist, where you can download the spreadsheet for free.
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