Most money advice starts with a budget. Let's start somewhere better: one number. Your FI number is the amount of money that, once invested, could quietly cover your life. It's the point where working becomes a choice instead of a requirement. You don't need a finance degree to find it. You need one number about your spending and a little division, nothing scarier.
What an FI number actually is
"FI" is financial independence: the moment your investments can pay for your life without a paycheck. Your FI number is how big that pile needs to get. It isn't about being rich, it's about buying back your time. Someone who spends $40,000 a year reaches their number far sooner than someone who spends $90,000, even on the same salary, because the target is built from your spending, not your income.
The formula (this is the whole thing)
Take what you spend in a year and divide it by 4%.
Dividing by 4% is the same as multiplying by 25, so if that's easier:
A few examples, rounded for simplicity:
- Spend about $40,000 a year, and your FI number is around $1,000,000
- Spend about $60,000 a year, around $1,500,000
- Spend about $30,000 a year, around $750,000
Notice what moved the number: not the job, not the raise. The spending. That's the quiet power here, and it's why two people earning the same can be decades apart.
Where the 4% comes from
The 4% figure is shorthand for a "safe withdrawal rate," an old rule of thumb from research into how much someone could pull from a diversified portfolio each year without running out over a long retirement. The idea: if your investments keep growing, taking out around 4% a year leaves the core intact.
Two honest caveats, because you deserve them:
- It's a starting point, not a promise. Markets, taxes, and how long you live all bend the real number. Plenty of people plan with a more conservative 3.5%.
- It's a way to aim, not a prediction. Set the target, then adjust as your life comes into focus.
(That's the educational version. None of this is financial advice, it's a way to understand your own picture.)
What your FI number is not
It's not a deadline you're failing to hit. It's not one perfect figure carved in stone. And it doesn't mean you quit the day you reach it. Plenty of people get there and keep doing work they love, just without the requirement. The point of the number isn't pressure. It's a direction.
Find yours in 60 seconds
The free Money Snapshot does the division for you and shows your net worth, your FI number, and how close you are, right in your browser, with nothing saved.
Run your free Money Snapshot →A few flavors worth knowing
Once you have your number, a couple of variations make it feel less far off:
- Coast FI: the smaller amount that, left alone, grows into your full FI number by traditional retirement age, even if you never invest another dollar. Reach it and the heavy lifting is done.
- Lean and Fat FI: the same math with a smaller or larger yearly spend. Your bare-bones number versus your comfortable one.
Each is just your spending plugged into the same formula. (More on Coast FI soon.)
From a number to a system
Knowing your FI number is step one. Watching it get closer is the part that keeps you going. If you want the whole picture in one place, your net worth, your savings rate, your FI ladder, and a real read on whether you're on track, that's what the Money System is built for. One calm spreadsheet, yours to keep.
But the number itself is free, and it's the right place to start. Run yours today. The hardest part is just looking. Once you've seen it, every month after is one small step closer.
Cole
Educational only. Nothing here is financial, investment, or tax advice. Figures are rounded examples for illustration.