What is Coast FI?, Assuming Good Intentions
What is Coast FI?
In trying to make the concept of Financial Independence relatable, I often look for those ‘eye opener’ moments for people, and the concept that I was initially surprised resonates so deeply is what’s known as ‘Coast FI.’
But upon further reflection, it shouldn’t be surprising at all.
Because Coast FI is both intuitive and a really powerful concept.
You’ve reached Coast FI when your investable assets are large enough where they will grow to your ultimate FI Number by your intended retirement age (either early or a more traditional date – your choice of timeline of course) with you putting ZERO additional dollars away as savings.
Simple back of the envelope calculation using an example of a 35-year-old looking to reach FI in the next 20 years:
Their FI Number is $1 million, which is 25x their annual expenses of $40,000.
They currently have $250,000 saved and invested.
Using the ‘Rule of 72’ and assuming an 8% annual market return, we would expect their assets to roughly double every 9 years.
At 44 they would expect an investable net worth of about $500k and 9 years later at 53 they would expect their net worth to double again to $1 million and be at their FI Number.
Their Coast FI plan starting at 35 seems very reasonable based on these assumptions, so to ‘coast’ on in to FI over the next 18 years, they would just have to earn enough to cover their expenses ($40k) each year.
This is a simple example and there's always nuance in real life, but hopefully this gives you a starting point to understand Coast FI at a high level.
Our friends over at The Fioneers have an amazing article that goes in-depth on the Coast FI Calculation that I suggest checking out for more significant detail and calculations.
This is a powerful concept that we all need to understand as it gives us many more options well before we reach the point of true Financial Independence that would give us the ability to coast on in to FI years or decades in advance.
Profound Quote on Assuming Good Intentions
"When working with people, assume good intentions.
When listening to people, interpret their words in a generous way.
You will occasionally get burned and mistreated by always assuming the best in others, but it is a far better way to live than the opposite."
- James Clear, author of Atomic Habits
ChooseFI Community Taking Action This Week
- Justin said, "Not so much a one percent better, but more like a 400% increase. After 3 years of listening to the show, this last summer I decided to look for a new job when negotiating a more competitive salary failed to bring my salary in line with what I thought I could get elsewhere. I am happy to say that next Monday I will be starting a new job that pays a little over 200k a gigantic 4x increase from where I was last year this time! I would have never thought this was possible, but I stuck to my guns and had the new company say a number first, and boy am I glad I did as I was nervous about trying for 100k from what I made. My wife and I were already on the path to FI and this will cut the time I need to work down to 5ish years."
- Krista said, "My 1% was passing the Salesforce Administrator exam! I have been studying for a few months and finally decided to bite the bullet and take it. What's even better is that my company is reimbursing me for the cost of the exam AND the study guides I bought. Looking forward to using those tips posted to negotiate my salary increase with this certification."
- Garrison said, "I have been listening for the past 3 years. I got into credit card rewards and it is finally paying off. My 1% better is that this week I have booked an 11-day trip to Maui with flights and hotels completely for free with points. We also have a 7-day trip to Missouri along with several other short trips all booked with points. Overall, I have 25 nights booked at hotels this year completely for free. My friends and family can't figure out how we are taking all of these trips on my salary when my wife doesn't work. When I explain to them that I am booking them with credit card points they think it's a scam or super complicated. Honestly, I just listened to Episode 9 and started opening some of the cards you mentioned along with a few others for my wife and I and voila! Free travel. I am convinced that anyone can and should do this because honestly, who doesn't love an 11-day trip to Maui that you don't have to pay for! I can't thank you enough!"
- Onkar said, "I am one of those people who repeatedly listened to Episode 147 with Tori Dunlap and Episode 211 and as a result of that we have managed to increase my 2022 salary by 15% and my wife's salary by a whopping 30% compared to the 2021 - so our 1% better is actually 22.5% better for our gross household primary income. Thank you so much for what you do."
- Erin said, "I have a small 1%--my side hustle of pet sitting has been growing. While it's not super lucrative, I really enjoy it, and make some extra money. I also signed up for one of the credit cards you recommend and also got my partner to sign up for one earlier this year, so that was a nice total bonus of $400!"
- Michael said, "My 1% better is not even being aware that the market had its dip last week (or the week before?). I have cut down how much media I consume, which has many benefits (good to be informed; but not sucked into the outrage machine). One of them is being blissfully unaware that the market went down, and just shoveling my money into my 403b, 457b, and taxable brokerage each paycheck as per usual."