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Promotions and Projections to FI

Friday mornings are supposed to be filled with good news right?

Well, fortunately I’ve got some today! After months of waiting for it (literally), I finally got promoted!

That’s not all I’m here to talk about though. Most everyone has some sort of method in which they track their progress to FI. I’m here to lay out my method, as well as detail out what I do and don’t factor in.

As getting paid more and reaching Financial Independence (FI) go hand in hand, promotions (and how often you get them) can have a big impact on how much faster you can get there.

The Promotion

Is there such a thing as a double promotion?

It certainly feels like I got one! Let me explain:

Firstly, the promotion I got was a big one. It was much bigger than I was expecting, and way bigger than I had in my FI projections (more on that later).

Secondly, while this was an internal promotion (I stayed with the same company), I was able to move offices. It just so happens that the office I’m moving to is only 2 miles from my apartment (whereas my current office is 30 miles)!

Now, I’ll only be at this new office about 3-4 days per week, while going to my old workplace the remainder of the time. Nonetheless, I’ll take it!

That means 3-4 days each week where I can walk or bike to work, and 3-4 days where I’m putting less mileage and wear and tear on my car. Doing the quick math and 3 less days of a 60 mile round trip commute is about 9,000 miles over a year that won’t be going on my car!

Not only will this hopefully extend the lifespan of my $100,000 car, but it is a surefire way to get exercise every day and walk more as that was one of my recent takeaways from vacation!

The job itself is something I’ve done before with new elements and added responsibilities, so it will be a good challenge. I’m on the record of saying I don’t love my job, and I can’t picture this new position changing that, but I am getting paid well and the people I work with are all really nice so I can’t complain.

While it was certainly frustrating waiting over 10 months since first broaching the promotion topic with my boss (seriously), I’m happy it’s finally happened.

The Projections

Making projections into the future in relation to FI (let’s be real, and everything else) can be very tough.

What investment growth rate are you using? What rate is your income growing? Are you factoring in if taxes change? What about inflation levels and rising medical premiums? Don’t forget about potential big personal life events such as getting married, having kids, caring for parents, etc.

Once you go past a couple years, there are so many unknowns it’s tough to accurately reflect that in a projection.

It’s for this reason that I don’t have an exact FI date, rather a time period (my 30’s) in which I would like to be FI (if possible) or at least Barista FI, where I could walk away from an unfulfilling job and make a smaller amount of money doing something I’m more passionate about.

Nonetheless, even though it’s tough to forecast and likely won’t come anywhere close to how it all ends up, I’ve still created my own personalized spreadsheet to track when the year I’d reach FI is.

In it, I take an ultra-conservative approach. While I do assume I’ll max out my 401K, HSA and Roth IRA every year, I’m otherwise assuming 4% annual returns, 2% expenses growth, and only 3% raises each year (fortunately, that’s pretty much a guarantee at my company).

Everything else I keep as is and let it flow. For me, it’s pointless to project other life events in certain years as that would essentially just be a shot in the dark.

That doesn’t mean it isn’t fun to play around with the sheet and see how different scenarios such as a big promotion here or combining incomes there could change my FI date! (cue the nerd jokes)

Back to the Promotion

One reason I brought up the projections aspect is because, as you could have guessed, with my plans pretty conservative, anything over that will cause a shift forward of my FI date.

As I only account for yearly merit increases, which went into effect last month, this is all extra. So what was the effect?

2 whole years!

According to my tracker, I can now finally hit my full FI number (targeting $1M) at exactly 40 years old. This has me feeling pretty good, because if I can somehow beat my 3% merit increases each year, and my returns are greater than 2% overall (4% returns – 2% inflation) that age will only pull forward.

This will get me to my real goal of becoming FI in my 30s!

Even with all the unknowns that life has in store, it is reassuring to know that should I choose to do exactly as I’m doing right now; there is a path to get to my goal.

Update to Goals

Because I’m conservative in my estimates, I must admit, even in my 2018 goals I accounted for a much lower promotion %.

When creating my 45% savings rate goal, with a 50% stretch goal, I wanted to be a little more accurate since it’s within the year and I accounted for a 3% merit increase in April, with a 5% promotion halfway through the year.

Well, I ended up getting a 5% merit increase, and a 14% promotion which totally blows my original 2018 projections out of the water.

I suspect my company gave me a much bigger one than I was expecting due to how long I had to wait for it.

Either way, running the numbers now, I would simply need to hit my yearly budget and I would have over a 50% savings rate.

I can’t really consider that a stretch goal anymore since it is much more achievable now.

Thus, I am now increasing my savings rate goal to 50% (essentially hit my budget) while my stretch goal is now 55%.

This way, to hit the stretch goal, I’d need to either come in under my budget by a couple thousand dollars, or I’d need to find a way to increase my income on the side (one of my other goals).

Concluding Thoughts

Having your own way of projecting your FI date can be pretty powerful.

The ability to run different scenarios of income or spending levels and the result it causes can give you achievable targets towards making real progress.

Going through this and updating my own forecast, it’s shown me just how powerful getting to those higher income levels can be on your savings rate, as well as reaching FI sooner.

It’s given me more thought on whether I want to stay at my company long term, or start to hop around in search of the higher paying jobs that could bring me to FI much faster.

On the flip side, I’ve also recently discussed how I really want to look into being location independent, and take advantage of my 20’s to travel more.

I’d likely be making a much lower income to do this though, which is tough especially after just getting a nice raise and seeing the effect on my savings rate.

This is still something I need to look into more. Running the scenarios of potential income levels vs spending and the effect it will have on my FI date will be essential in making the decision!

I’m excited that maybe I can find some way to make this whole thing work, but that’s an update for a later time :).

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Do you have an FI date tracker? If so, do you account for any promotions or other life events into the future that could impact that date? Do you take a conservative or aggressive approach to your forecast?

16 thoughts to “Promotions and Projections to FI”

  1. Excellent news! Way to go. Now you have no excuse to not walk more 😉

    I don’t have a date tracker because of the unpredictability of the future, but my general target is $1 million as well. From there, I will evaluate. Am I wrong in that the core principle for being FI is when the average yearly interest and dividends on your investment portfolio covers your expenses? It seems simple to me but maybe I’m missing something? Haha.

    At $1M, even if you’re averaging a poor rate of return like 3% or 4% means you’re earning $30-40,000 in interest and dividends. I’m quite confident I can live more than comfortably on that ($2,500 to $3,333 a month). If the market does better, to the tune of 6-8%, that’s just gravy and more money to keep compounding over time. Even a bad year or two in the market wouldn’t wreck you at that portfolio level because you have that existing balance as a reserve.

    1. Thank you! Yes no more excuses haha.

      I agree though! Getting to the point where dividends and interest cover your spending is exactly where I want to be at! It definitely does seem a lot simpler that way 😂

  2. Congrats on the promotion. In addition I think a major saving you’ll be making at the days in your new office – time to sleep, time to work out, time to daydream, time to enjoy the present or plan for the future.

    Some people manage to make good use of their commuting time, but for most people I think it’s actually ‘dead time’ and their productivity would increase if they could find a way to ditch the commute and work closer to home.

    HH

    1. Thank you! I totally agree with that. I’ll be getting a lot more time back not having to focus on driving for over an hour and a half each day. I think just alone by walking to work I’ll be getting a lot more exercise which will in turn make me healthier!

  3. Hahaha you neeerrrrrrddddd 😉 I should probably have a FI tracker/an actual projection, but I’ve been avoiding it because it would be too depressing. Maybe after a few months of the small change of no student loan payments I’ll be more ready to do that haha.

    Congrats on the fantastic news! Ten months is absolutely ridiculous so I’m glad this is finally happening!

    1. Thank you! Yes I find it can be a good motivator! Like seeing the impact of spending $2,000 dollars a year or making $X more in this future year. It can’t hurt to play around with one!

  4. Congrats! Yes, it’s a huge leap forward in terms of FI, but it’s also a great accomplishment to be noticed and rewarded in what you do. I hope you take a moment to celebrate the win!

    (Also, aw yiss to the 55% stretch goal!)

  5. Huge congrats man! I think you will find over time that the shorter commute is actually the better part of the deal than the financial gain. Having all that time back in your day as you said will allow you to exercise more, walk more, and do so many things that are good for you, you’ll find it those will make you a better person faster than the money. And they will bring financial gain in and of themselves!

    1. Thank you I appreciate it!

      I do really agree with you there. I think I’m going to find it very hard to ever go back to consistently doing a long commute after doing this for a while. After this role I may need to work out a deal with my company or find a different one closer by!

  6. I question whether barista FI is a real thing. I have five part time side gigs that pay on an hourly basis as much or more than I made as a corporate exec. And they are fun, but I wouldn’t do any of them for less than my current rates. Nor would I be a guide at a National Park for $15 an hour when I made ten times that much. I love hiking the parks but working there would be just as restrictive as any other job and getting paid peanuts would take the fun out of it. I think working after FIRE, which I do for fun and purpose in spite of needing no income, will only be enjoyable if the pay is close to your max rate before you retired.Otherwise it’s going to feel like you are being ripped off. I do a lot of unpaid charity work too, and that adds to my life, but not like good paying side gigs, they are better.

    1. I agree with you there. My goal is to build a side hustle that does just that: pays me well for something I can enjoy. However, if I can’t do that, I could definitely do that lesser paying jobs. Though not as enjoyable, I’ve had some truly bad jobs in the last I have put up with. Perhaps knowing I’d be going back to something like that would give me the motivation to start a successful, fun side hustle! 🙂

  7. Wow congratulations man! This is awesome! It’s a win on so many levels, the new office location, higher income, accelerated FI date…. blessings on blessings. Cheers! Congrats again!

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