New FI Math (an Update)
Two weeks ago, I talked about the value of cutting $100 from your monthly expenses which leads to an astonishing $30,000 reduction in your FI Number.
But that’s not even half of the benefit of cutting $100 per month as the actual value is:
$90,000
You are $90,000 closer to FI when you cut $100 per month from your budget.
The missing link is this:
You’ll invest that $100 per month into the stock market (most likely a low-cost index fund) and you’ll expect to earn an 8% annual return on that newly invested money.
I opened up a compound interest calculator assuming and assumed three things: a 20 year path to FI, 8% annual return and $100 monthly investment.
After 20 years, this $100 per month is worth nearly $60,000.
Add