How to Un-FIRE yourself – a crash course. There are many ways to UN-FIRE oneself. By far the easiest one is to buy a house that is way too expensive. And that is exactly what we did! You can too 😉 It’s so great to be able to provide this useful financial information with a restarted blog!
The Cheesy Index
I’ve revived the Cheesy Index again, and… it is a bloodbath! We used to be able to get around with about €29.000-33.000 per year (we had little to no mortgage payments and are frugal most times). With the new money pit we are now looking closer to about double that amount (in cashflow terms). If one wants to become Financially Independent (FI) (in cashflow terms), one will need to have sufficient wealth and associated income/withdrawal potential to cover these expenses.
For our calculations we assume a 4% withdrawal rate (ETF’s/stocks/dividends) / net cashflow income from rental properties. This might be realistic/slightly conservative based on current numbers, but things can change in a heartbeat. Besides market forces, also the government can be highly unpredictable. We also assume the wealth tax (Box 3) as additional expenses that one would need to cover. For this you need more wealth, on which you pay more taxes. Goal seek is your friend here (or iterative calculation, you pick).
This is where we used to be up to the end of 2021:
We made it, we were FIRE. As long as we didn’t buy a ridiculously expensive money pit. If only we just bought a townhouse for under €450.000. If only we were smart people.
But we didn’t and we weren’t. We Un-FIREd ourselves with ruthless efficiency. Heck, until today I didn’t even know how bad it was. Now, we obviously did some math. We are still able to live on one income rather comfortably. The new mortgage and other home expenses are pretty much covered by rental income (renovations excluded). So, life is not all that bad. But we pretty much start again to obtain FIRE for most of our other living expenses. Two incomes would help, as the second would help build up our nest egg once again to hit that magic 100% FIRE mark. Not sure if we will go for this, but time and our “normal” attitude towards dealing with money might still get us there. If it does, it is going to take some time, likely about 8-10 years (depending on market conditions, work, income and taxes). Crap, still can’t retire early! Will have to wait until we are both over 50. The horror!
Anyhow, this is how bad it is:
Are you smarter than we are? Or have you also made some Un-FIRE moves lately? Feel free to elaborate!