Hit This Number and You Can STOP SAVING! (Even When You are Young)

23:10Now, let's look at an example number two. Now, this is a high income example. And so this is going to be a physician. And our physician's name is going to be Karen. OK, so Karen has a goal of three million dollars at the age of 65 and she is 25 years old right now. So she has about one hundred and fifty thousand dollars invested currently and at a seven percent rate of return where Karen currently is with one hundred and fifty thousand dollars invested. that grows to about$814 ,000. So she is nowhere near her goal of$3 million. Okay. Her Coast Fire number today is about$550 ,000 and she is well below it.

23:45So since she is a physician and she's making$400 ,000 per year, she is going to need to adjust her plan and start investing more dollars so that she can catch up. And she's going to have to plug these numbers in the calculator. So she decides, okay, what I'm going to do is I'm going to have an aggressive path for saving over the course of the next five years. I am going to reduce my spending. I am going to live like I did in college. I'm going to live like I did in residency, and I am going to move on and have the ability to retire. And as my income increases, I'm going to take those raises, and I'm going to save them so I can hit coast fire by a certain age.

24:15That way, I have the ability to know that at a certain point in time, if I want to stop saving and investing, and I want to go enjoy more of my dollars than I am making with this high income, I absolutely can. High income earners, and I know we have a lot of you who listen to this podcast. If you are a high income earner, I want to tell you this right now. You have the ability to do some amazing things with your money, but it comes down to you. You have to take the responsibility and know that many high earners right now in this country are living paycheck to paycheck. And if you are living paycheck to paycheck, I want you to know that I can help you.

24:51I can help you through this process. Continue to listen to this podcast or join our one-on-one coaching for high earners. These are the things that are going to help you dramatically long term. But you need to understand that you have the most valuable asset of all, which is a high income. And if you waste that high income, all the work that you did to earn that income is just being thrown into the wind, buying things that you don't care about. When in reality, what you really care about is freedom. You care about freedom. And so for many of you out there, if you can break that paycheck to paycheck cycle, which is not easy, I understand it.

25:22But if you can break that paycheck to paycheck cycle, you will maximize your dollars and maximize the amount of time and energy and work that you are putting into making this money. I know how hard it is to get to that level. And when you get there, you got to make sure that you understand where your dollars are going, especially up front and having a plan in place and an automated plan in place, in fact, is the really big key. So that you can focus your time and energy on your career and your family and not have to worry about your money all the time. That's the key. Now, let me give you a third example of someone who is a teacher, who maybe their income is a little bit lower than the first two examples.

25:53And let's look at this teacher in terms of how they can think about this. Now, one, teachers have an option for them. They have something called a pension. And that pension can help a lot of teachers if you are going to work the amount of time that it takes to earn your pension. If you're not, then don't count it as guaranteed income. Instead, plan for not having that pension, okay? But we're going to use a teacher that has a pension that covers a big chunk. So the investment goal is smaller. So this teacher at age 35 needs about$600 ,000 from investments at age 65 and currently has about$90 ,000 invested.

26:27OK, so this teacher needs a lot less than what most people would need because they have a pension in place. Maybe you work for a union. Maybe you work for a big company that's had pensions for a long time. This is a guaranteed pension. You want to make sure the pension is guaranteed, but it's a guaranteed pension. Maybe you work for your city. Maybe you work for your county and they all have pensions. Those are really good benefits, guys. If they are guaranteed and they're vested and they're locked in and you have that pension in place, boy, oh boy, is that great. So at a 7 % rate of return, since this teacher already has$90 ,000 invested, this grows to about$685 ,000, which is past the goal.

27:04And so Coast Fire today is only about$79 ,000. That's all he needs, this teacher needs, in order to be able to invest those dollars. So a pension can be something that is a coast fire cheat code, because all you got to do with when you have a pension, maybe you have social security, is you got to just fill in the gaps so that you can save and invest less. So for those of you out there who, you know, have that pension available, maybe you're military, maybe you're a teacher, whatever you are doing right now, utilize your pension as a tool and a massive tool when it comes to retirement. But you want to make sure that it vests.

27:36I think the big mistake most people make is they're guessing, I'm going to get a pension, but then all of a sudden 15 years down the line, they don't have that guaranteed pension and they realize they don't want to do this job anymore. And so you want to plan in a way that makes sense. But if you know that you're going to get that pension, it is a cheat code for sure when it comes to Coast Fire. So now let's talk about some of the biggest advantages of Coast Fire. And then I want to talk about some of the downsides as well. So first, let's get into some of the biggest advantages. Well, Coast Fire, I think for many people, you can see the largest advantage, which is it reduces your overall financial stress.

28:10You don't have to stress as much about making sure that you're hitting your retirement goals and hitting your retirement numbers. No, you have your retirement question answered by just achieving Coast Fire. And this is why I think a lot of you out there, when you're trying to think through, what is the first couple of things I should be doing with my money? Well, sure, I know I need to get my employer matched, and I need to make sure I have my emergency fund in place. But once I get that stuff going and I get that stuff rolling, what should I really be targeting here? I think you should be targeting Coast Fire early because it reduces that stress, and it reduces that anxiety.

28:42Even if you aren't going to achieve Coast Fire for the next decade, you're going to take it slow, but you want to hit this number. I love that for you. I love that for you because it removes the big monkey off your back. It removes the weight of the world on your back and allows you to have the ability to save and invest into these dollars. Plus, what's another advantage? Well, think about the career flexibility you have. If you achieve Coast Fire, you have flexibility to do what you want with your job. as long as your job can cover your bills and it can cover your expenses. That's pretty cool.

29:13That is a cool position to be in that most people probably don't realize they currently could be in right now. So if you're a good saver or investor, check your Coast Fire number to see if you have that flexibility. But you could take the more interesting job that fulfills your days more than the higher paying one. I love that because for years and years and years, what I did was I had to take the higher paying job just to be able to make sure that I was doing this the right way. And so for many of you out there, you're probably doing the same thing. I know people in Master Money Academy have to do that.

29:42They talk through this and they're like, I got these two jobs. One pays a lot more, but one just, you know, lets me have this flexibility and I can kind of do what I want. And they don't really bother me. You want to have the one that lets you have the flexibility that they don't bother you. But the only way that you can worry about that as much is if you have this Coast Fire number hit. Okay. Another thing about Coast Fire and a great pro is that you have less lifestyle inflation. All right. You know what the number needs to be that you need to hit in order for you to be able to retire. And so you're not going to just keep increasing your lifestyle every single year because then it's going to put your whole Coast Fire number out of whack.

30:13Why? Because you know you want to spend$80 ,000 to$100 ,000 per year, so you're not going to go buy a$10 million house and then whack out your Coast Fire number unless you are willing to go back and grind and save and earn and invest. And so it just reduces for most people them having to worry about lifestyle inflation at much. Plus, it just gives you a better work-life and balance. If you got an emergency fund in place and it's six plus months and you got a Coast Fire number hit, you're like, I'm unstoppable here. I could get fired today and I can go work part time at Costco as a cashier, which, by the way, Costco cashiers I just saw the other day make on average about$33 an hour.

30:46Backup plan right there. And I can go be a cashier for a little while until I find my next job. I mean, you got options and flexibility and most people just don't realize they have this free will. You've got free will available to you and you can do some of this stuff. But also you get earlier freedom. If you hit your Coast Fire number and then you aggressively want to save really quickly over the course of the next decade after Coast Fire because you feel as though, I want to achieve financial freedom even faster, you got the option to do that. And so for many of you out there, you're thinking to yourself, well, I'm calculating this Coast Fire number.

31:17I want to do this. How should I think about this? I would kind of even make sure that I invest and save a little bit more than even the number I think it needs to be. That way, if you adjust or tweak your number, then you don't have to worry about it as much. I would make sure that I'm calculating this on a yearly basis and understanding exactly where I stand so that you can readjust if you need to year in and year out. So once a year, make sure you know your Coast Fire number and are looking at it. But it also just allows you for more intentional living. Now you've got your North Star in place.

31:42You know what you're doing. You know where your number is. And so then you can make tweaks. You can make adjustments. And you can do this in a way that makes a ton of sense for most people. Now let's talk about the downsides. Because I don't think the downsides of Coast Fire are talked about enough. And I want you to be informed on both sides of this equation here. We need to understand what the good is, but we also need to know what the bad is because there are some downsides to coast fire. This whole strategy lives and dies on assumptions. You could be 25 years old and you're assuming something is going to be the way that it is over the course of the next 35 to 40 years.

32:19And many people listening, that might be their first thing that they're saying back to me. You know, they're screaming at their screen or they're yelling at me in the car while they're driving to work. like, but you're assuming something is going to be working for me for the next 35 years. I get it. And so that's a downside, I think, to Coast Fire, which is why I think you need to track the number on a yearly basis, understanding that your goalpost may move just like my goalpost has moved because I had kids, my family changed, my lifestyle did inflate, which I think is positive for most people is to have some lifestyle inflation, but it did happen.

32:49And so because of that, I needed to adjust my number. And you're going to need to do the same thing. If you want to be successful with Coast Fire, you're going to have to track your number on a yearly basis and you're going to have to make adjustments. Okay. Secondly, is returns aren't guaranteed. We all know this and we've said this, but many of us are blinded by the returns we've had over the course of the last 20 years or so. Where since 2008, we have had a wild bull run. Sure, we had COVID. We've had some down and pull dips and pullbacks, but they are nothing compared to what should have happened over the course of those last two decades.

33:22And so we can become blinded by just a massive 20-year bull market. I thought the market would pull back in 2015. It is now 2026 when I'm recording this and the market has just bowled all the way through COVID and all these different crazy things that have been happening throughout the world. Wars, all different things. And so returns aren't guaranteed. So anything in this world can happen. And so you just want to make sure you're prepared for that. Inflation is the third thing. Inflation can run hotter and if it's starts to increase over time. Sometimes you want to make sure that you're just sprinkling in some more sauce when it comes to making sure that you are adding to your retirement.

33:59That's another thing I would consider to do. What's a beautiful thing that helps you with that though? Something like an employer match. If you have a good employer match and you just make sure you continue to get that free money, get that match, you could be still saving and investing anywhere from 6 % to 10 % of your income without even having to do anything because your employer is doing a ton for you. And so that could help you just make sure that you outpace inflation. That could help you with a lot of different things. So making sure you're adding that number in is important. Another thing is that retirement expenses can change over time, which is why I want you to continue to track the number.

34:32The healthcare one is a big one. We got to keep monitoring healthcare and seeing what happens. If you haven't heard our recent episode that we did on healthcare, check that out. Plus kids, you might have aging parents, you might have all these different things that are changing. So you got to track this on a yearly basis. And then if you want to save or invest or retire earlier and you make that decision, you know, 10 years down the line, well, then you're just going to have to adjust your Coast Fire number and start to invest again. You're going to start to have to put dollars towards your retirement investments.

34:56And so things could change over time. Those are the downsides is your assumption could be wrong. That's what it really comes down to. And if your assumption is wrong, this is why we want to just track this yearly. You don't want to just do your Coast Fire number, which is what a lot of people suggest for some reason, which I really don't understand, but you don't want to just have your Coast Fire number and just, I'm done. I'm going to forget about this now. I don't have to worry about it anymore. See you when I'm 65 retirement accounts. No, that's not what I want you to do. That's not what a prudent person would do.

35:26That's not what a wealth builder would do. Instead, they would look at this on a yearly basis on a minimum, and they would say, okay, I feel as though I'm on the right track here. This is where I was projected to be. And you can even break these down like with investment calculators. You can break them down to see where you feel as though they should be on a yearly basis. and just remember, markets go up and markets go down. So don't let it make you freak out, but just make sure you're kind of tracking this so you know where you are on a yearly basis. And one thing I think a lot of people think is Coast Fire is like, I'm done, I'm never gonna save ever again.

35:56It doesn't mean you're never gonna save or invest again because a lot of people are gonna want to. A lot of people are gonna wanna get ahead. They're gonna want to get those dollars going, but it means that you don't have to. You're not required to anymore. You have the ability to say, all right, I've got money in place, and you've removed the obligation. You haven't removed the option, but you've removed the obligation of having to save and invest for your retirement. And I think that's the power. When obligations get removed out of your life, it makes it so much easier and simpler, so you don't have to worry as much.

36:27So how does Coast Fire compare to some of the other sources of fire? Now, we're going to do an entire episode on the different types of fire so that you guys can understand how this works. But Coast Fire is one that if you compare it to something like lean fire, for example, lean fire means that you're retiring fully on a very minimal amount of money per year. So like a Mr. Money mustache, if you go back and read his blog, that's what he did was lean fire or something like Jacob Lund Fisker from early retirement to the extreme. That's what he did. And lean fire is basically not the lifestyle I want to live.

37:00So many of you might be a okay with lean fire and you might be okay living on 30 or $40 ,000 per year. I am not. And so that's not something I'm interested in, but it's great for frugal folks. If you're frugal and you don't have to worry about it, then that's great. Then there's barista fire. So the way barista fire works is that you save a certain amount of money that's going to cover, let's say 50, 75 % of your retirement. And then the rest of your retirement, you plan on taking a part-time job in an industry that you are interested in. But many people also will use barista fire as they'll go to like a Starbucks.

37:32This is the reason why it's called barista fire and they'll work 20 hours a week so that they can get the health insurance as well, which saves you a lot more. So there's things like that that we can look at. Then there's fat fire, meaning if you're a high income earner and you want to have 10 to$20 million invested, then you want to live this lifestyle where you can have this lavish retirement lifestyle. That's what fat fire is. And there's traditional retirement where you were just kind of working, saving, investing throughout your entire career. You retire at a traditional age between 60 and 65 and you're just doing it on a monthly basis.

38:01Many posts do that. That's the way that most people do. And there's other types of fire out there. There's things like location arbitrage. There's so many different things that you can do. And we will talk about those in that episode. But I just want to kind of compare it to some of the other options out there so that you can get your mind going and thinking, okay, well, what are the options that I actually have? Those are some of the ones that you have. So who should consider Coast Fire? Well, I think anybody out there should consider using it as a milestone marker on your finance journey. It gives you that diversification of your personal finances.

38:33It allows you to have the ability, and we'll do an episode on diversification of personal finances. I think it's an interesting topic, but it will allow you to do some cool stuff, but also it's great for people who are burned out. If you're a burned out professional and you want to make a career change, or if you're a parent that wants more flexibility, or if you're an entrepreneur, if you're a teacher and you're like, I just want to get to this point in time, or you're a nurse and you just feel as though you just need this career change or you need to be able to take your foot off the gas and not have to take those extra shifts in the middle of the night and just to make ends meet, well, this is a great way to do it.

39:07This is a great way to think about it and a great way to work through some of the things that you could be doing. So this may not be ideal for people with little save yet or those who are planning to retire early. If you are planning to retire really early, like in your 40s, this is a little bit harder to do. This is more for people who think as though they're going to continue to work overtime and they just want an option and a flexibility to be able to get to that point in time. But I think everybody, even if you are going to retire early, you're going to hit Coast Fire at some point in time.

39:32It's for people with, if you have unstable income, it might be harder. Or if you want to inflate your spending over time, meaning if you feel as though you're going to drastically increase your spending over time as lifestyle changes, it may not be a perfect option for you, but it's still a goal that you should hit and you can adjust every single year. I think anybody out there should try to achieve Coast Fire as one of their earliest financial independence goals. Because once you get there, all of a sudden, you can then realize, oh, this is possible. I can do some really cool stuff with my money.

39:59And this is the first FIRE step that I could take in order to get to the point in time where I feel as though I'm making progress. So let me talk about a few common mistakes I see when people think about Coast Fire and some of the things that they do. One is they assume this 12 % rate of return forever. Again, we already talked about this, but do not do that. They ignore inflation, which inflation is going to eat into your buying power every single year. Do not ignore inflation into your calculations. Make sure you are at least looking at like a 3 % rate of inflation. That's kind of on average.

40:32You can go to 2 % if you really feel there. But I like to be a little more conservative, again, when I am doing this. Do not forget taxes. Taxes is a big deal when you are running these numbers. If you have this all in a taxable brokerage account, you're going to have some taxes that you're going to need to look into. So don't forget those. You know, not accounting for future goals like kids or buying a bigger home or a business. Those are all things that could derail this. And I don't want you to derail it if you don't account for some of that stuff. And don't underestimate health care. If you're not factoring in health care into your number that you're spending every single year and you think you're going to retire early, this is before Medicare.

41:03So this is before traditional 65. Then you want to make sure that you're factoring in that health care. And I think for many people out there, if you're like uneasy with this and you're like, can I really stop? Can I really stop investing? Yeah, you can. But I would still continue to invest. Many people I talk to, if they're uncomfortable with that, you know, you got your employer match that you can keep getting. That's a great, you know, sprinkle in that every single year you're going to, you know, be able to invest a few thousand bucks. You've got things like a Roth IRA. Maybe you want to continue to contribute to that at least.

41:32And so you got these two things that you're contributing to. Maybe it's your 401k that you enjoy because you need to get some tax breaks. Sure, you can do that as well. And I think just having the ability to think through, well, if I keep investing, even if it's a small amount of money over time, you know, this is going to help me pace is going to help me keep me comfortable with this strategy. So I don't have to just be aggressively investing every single year. And that's going to give you that the ability to be able to do that. My relationship with money has changed a lot over the years. Early on, I thought building wealth was about making more money.

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45:17So here's your action plan if you want to do this. One is I want you to calculate your retirement number, meaning how much you're going to need by the age of 65 or whenever you feel as though you want to retire. Two, is I want you to determine your Coast Fire number. You can use any of those calculators online. Again, we'll link NerdWallet Wealth Partners down below, but there's a bunch of great ones out there. I want you to compare it to what you currently have invested now. When you run it through a Coast Fire calculator, you're going to see how much you currently have invested now, and I think you could see if you already are Coast Fire.

45:46And if you already are Coast Fire, let me know down in the comments below. If you're listening on Spotify or YouTube or Apple Podcasts, let me know down below. I want to hear from you. If you ran these numbers for the first time, you're like, whoa, I'm coast fire right now. Let me know. I want to hear from you. Decide whether the flexibility is worth reducing future savings. So that's the big question for a lot of you is, is this flexibility worth it to just stop reducing future savings? For some people, it is. For some people, it's not. And then revisit this every single year because your goals are always going to change.

46:17And these are things that you're going to need to be doing. But you may be closer than you think. And I want you to run the numbers this week. And I want you to check. So once you finish listening to this episode, run the numbers. I want to hear from you and see if you are actually coast fire. Well, listen, thank you so much for listening to this episode of the Personal Finance Podcast. Again, if you want to join me and you want to join Master Money Academy, I want to invite each and every single one of you to do so. All you have to do is click the link down below in the bio, and you're going to get seven days free inside Master Money Academy.

46:49What do you get with those seven days? Well, we have all of our courses inside of Master Money Academy. But in addition, every single week, I do a live coaching call where I can coach you through any personal finance situation that you are working on. And I can help you through the process. We do this on a weekly basis inside of Master Money Academy. Plus, if you've got questions, you can ask a question to the community. We have some really sophisticated people in there. We have actually people who are money coaches in their own rights that are inside Master Money Academy who help people. And they do this as a business.

47:17So there's all kinds of folks inside Master Money Academy, which is really, really cool. And I'm really, really excited for the direction that we are taking it. We actually just moved Master Money Academy to a new platform. And so really pumped about that as well. So again, click the link down below in the show notes if you want to join Master Money Academy. And also, if you are interested in doing some one-on-one coaching, we will have that available over the course of the next couple of weeks. And you can inquire about that as well and see if you qualify. So you have to apply for that. But if you do qualify, we can talk to you about that too.

47:48So thank you guys so much for being here on this episode. I truly appreciate each and every single one of you. I value guys so much. And I think that for many of you out there, understanding that our goal with this show is to make sure we bring you as much value as possible, some free value. This is a free value show so that you can take these and put them towards your life and build wealth for your family. That's our goal with this is to help you build wealth for your family, build generational wealth for everyone in your life so that you can help them through this process. If you know someone who get value out of this show, stop what you're doing right now and share this with them.

48:22Share this episode with your friends and your family so they know how Coast Fire works as well because this is how we grow and spread the message about personal finance so that more people can understand how it works. But we are not taught this in schools and so you want to send this to as many people as possible so they can understand how to build wealth as well. Listen, I appreciate you, love you all, and I'll see you on the next episode.