I’m updating my financial independence charts, but this will likely be the second to the last time. I’m devising a new visual aid to track my expenses and hope to have a new system in place by the new year.
As a reminder, here is where I stood at the end of October 2015.
October 2015 was a spectacular month for the total stock market index and my net worth increased an absolutely stunning$44k. This number is all the more amazing because that was my first official month unemployed.
Here is where I stood at the end of November 2015.
My net worth (as measured by the green line) increased by about $5k, but that increase was mostly due to my Australian tax return. Australia’s calendar year ends June 30 and I just received my refund.
My expenses (red line) were reasonable as well.
This chart really isn’t much fun to update without my previous income. Ho hum.
As a reminder about the formula for these charts:
The red line is my expenses each month. I calculate the green line based on a method I found in the book, Your Money or Your Life. The formula in the book reads:
(capital x current long-term interest rate) / 12 = monthly investment income
In my head and for my charts, I’ve tweaked the formula for myself as:
(net worth x estimated yearly withdrawal rate) / 12 = monthly projected passive income
My estimated withdrawal rate for my own finances and the number used in the spreadsheets is 4%. I derived that number from the aptly titled “4% rule“. This method, necessarily, involves a bit of assumption. I expect my investments to return 7% a year and inflation to hover around 3% a year.
estimated yearly withdrawal = expected rate of return on investments - expected inflation.
Here’s how many months my current projected passive income would have covered over the last 5 years.
Want to build your own financial independence chart? See my generic spreadsheet here.