Pre-Financial Independence: The New FI?

pFI – the new FI[/caption] I recently discussed and defined the terms FI, RE and FF. I’d like to introduce another term – Pre-Financial Independence or pFI. pFI is just like it sounds. You have not reached FI, but you’re at a point where you have some choices. Perhaps the most obvious choice is go part-time or take a job that will make you much happier but pays less. pFI is obviously easier to attain than the ultimate goal of FI. I just recently became familiar with this concept and Physician on FIRE discussed this concept in a blog post titled: What’s Your Part-Time Number? In my opinion, pFI is the new FI. Why? FI can seem unattainable or “too far away” for most people. pFI isn’t. It may be closer than you think! There is no hard and fast rule on how to choose your pFI # but it should be at least 50%-70% of your FI number. So, how do you calculate these numbers? The short answer is that you estimate your yearly expenses in “retirement” and multiply that by 25. Or take those yearly expenses and apply the 4% rule. The 4% rule basically states that you can withdraw 4% of your portfolio annually and most likely not run out of money. It’s tough to know what your expenses will be unless you know what you are actually spending now. Keep in mind that the goal is to be done with things like paying off your mortgage and other debt at FI. And as mentioned previously, these expenses can and will change, so you may want to pad these numbers a bit. Here are our (tentative) numbers with dates: pFI # = $3 million by 2027 (I turn 50) FI # = $5 million by 2037 (I turn 60) FF # = $7 million by 2039 (I turn 62) [ Editor’s note: After this post first went live, I realized the FI & FF numbers & dates were slightly off, they have since been modified ] You’ll notice that I chose 60% of our FI number for our pFI #. These numbers probably seem really high to most of you. I figure the more the better (and safer). They are tentative since we are still working out what our actual spending is. I recently added M’s accounts to YNAB so we’ll have a much better idea in the next month or so. We are also still working on the plan with our FA. I’ll be sure to post an update once our initial plan is finalized. My pFI date is only 10 years away! And, we may reach that # sooner. What does my pFI look like? I’d cut down my clinical duties to 3 days a week (2.5 perhaps …). I’ll be able to spend more time with my kid(s) – the first one will be around 10 then. I’ll have more time to work on other endeavors like this blog. I’ll be in awesome shape. I can’t wait. Have you thought about your pFI # or part-time #? Comment below!]]>

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11 Comments

  1. Hatton1 on July 9, 2017 at 8:44 am

    Interesting concept. With a derm practice part-time will be easy to achieve. Let’s hope the market keeps going up.



  2. Physiciancouple.com on July 9, 2017 at 11:40 am

    Great post, Bonnie. Interesting to think about. I view another component of pFI as the time when you can eliminate or greatly cut back on disability and life insurance (for us I am thinking age 42 or so which will put us at debt free, 529s fully prepaid, and with about 2mm in investments/3mm net worth). I look forward to reclaiming that extra 10-12k/yr to invest.



    • Miss Bonnie MD on July 9, 2017 at 4:46 pm

      I don’t think we will cancel our policies at pFI – since we aren’t “there” yet. And if I became totally disabled without DI, our ultimate goals will not be met. Also, our life insurance policies are pretty cheap. I’ll certainly get rid of the COLA rider in my disability policy though. Our premiums are nowhere near 10-12K a year.



  3. GBC on July 9, 2017 at 9:21 pm

    Thanks Bonnie. It is so much more useful how you give advice, with actual real numbers. Very inspiring and motivating!!! I have 12 years until 50 and now plan on having my pFI number greater than I originally thought possible.



    • Miss Bonnie MD on July 9, 2017 at 10:11 pm

      Just realized I think the FI and FF dates are too early, I think I copied from the wrong report. But the pFi is accurate. I’ll just leave them up for now.



  4. Physician on FIRE on July 12, 2017 at 8:38 pm

    I like the term pFI, and appreciate the reference to my piece on part time.

    In today’s dollars, your pFI number is roughly my FF number, but then again, we don’t live in NYC and inflation is not a factor since we’re closing in on that number (exceeded in net worth, but not there in terms of nest egg after subtracting value of primary home and 529 Plans).

    I imagine you’ll hit those goals sooner than you think.

    Cheers!
    -PoF



    • Miss Bonnie MD on July 12, 2017 at 9:42 pm

      Numbers somewhat arbitrary but we should get a good hold on our combined spending/expenses this year.



  5. njlmeeks on July 25, 2017 at 11:10 am

    I’m looking at this slightly differently from an expense standpoint but with the same goal in mind. I have my FI number and have figured out much money needs to be saved every year for us to meet our goal of FI at a certain age. However as expenses change (pay off loans, daughter goes from full time child care to public school & part time child care, husband & I gets raises, etc), then I know how much I can cut back back on my job financially to be able to still meet those goals and should allow me the option to go part time before we are FI. This doesn’t depend on my investments making a certain amount and doesn’t depend on being able to pull money out from investment accounts. It is less definitive than your calculations, however because it can be a moving target.



    • Miss Bonnie MD on July 26, 2017 at 7:11 am

      Many ways to get to the same goal :). I don’t plan on pulling out from investments either for pFI. In about 4-5 years my loans will be paid off freeing up significant cash flow. Enough to cut back one day a week but I likely won’t depending on circumstances. I, too, hoping for public school that will depend on where we will be then.



  6. […] call this stage pre-FI – where you’re not FI but you’ve reached a point where you don’t need to […]



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