The first reader case (Reader Case #1: I love my job, but when can I FIRE?)) did better than expected. Looks like folks are interested in peeping other people’s financial situations 😉
Want your situation analyzed? Fill out the form here: FIRE Reader Case Study Form
Today’s reader–also from the Bay–is wondering if you can hit FIRE without a six-figure income. They also have a few tricks up their sleeve that give them a few choices on how soon they might be able to retire.
Reader Situation
What’s up Intristang? I read your first reader case study, and it was great! But I’m wondering can you only FIRE if you make well over $100k per year?
I currently live in the Bay Area, am in my mid-30s, and am actually not in tech. Like many other people here, rent and going out are the main things driving up my monthly expenses. Since I’m not in tech and don’t work at a public company, my finances should be pretty straight forward.
During COVID, I’ve been looking at different places to move. If I stop being lazy, I’m confident I can find and move into an apartment that’s $500 cheaper than what I’m currently paying. Also, I recently had a new opportunity that came up where I could freelance and make about $500 a month.
Lastly, like your first reader case, I love the Bay but am open to relocating/moving abroad after retirement (especially if it reduces how long I have to work). Thanks for checking this out, and I hope you have time to analyze my situation!
Gross income: $95,000 gross
401k deduction $19,500 (maxing 401k currently but haven’t always)
Monthly spend: ~$4,500
Debt: none (paid off all my student loan debt!)
Fixed assets:
None (renting and no car)
Investments:
Savings: $15,000
401k: $80,000
RSU/ESPP: N/A
Roth IRA: $8,000
Brokerage: $9,000 (Robinhood mostly for fun)
Hope I answered everything you need!
-Non-Six-Figure FIRE?
First Take on Reader Situation
Thanks for reaching out and sharing! First thing’s first: FIRE is not just for folks making six figures. FIRE is for everyone (or at least those willing to make some changes)!
First thing I’m noticing is while you don’t make six figures, you’re pretty darn close! Also, the $4,500 per month is a little high to me but is probably average or low in general.
I like that you are maxing your 401k contribution, and I love that you’re open/able to potentially reduce your rent and start freelancing. Also, big kudos on zero debt!
Lastly, your openness to potentially moving out of the Bay Area/moving abroad will further open up your options and potentially shave several years off from your FIRE goal.
Base Analysis
Now let’s clean up their financial situation:
First, let’s find their net income. We can start by deducting their 401k contribution from their gross income ($95,000-$19,500) to arrive at $75,500. Then I’ll use smartasset to calculate their California net income: $53,400. I will be adding back their 401k contributions in the savings section below.
Second, I’ll add up all of their investments to have total assets.
With that, here’s their summarized financial situation:
| Summary | Amount |
| Income | $95,000 (gross), $53,400 (net), $72,900 (incl. 401k) |
| Expenses | $4,500 monthly; $54,000 annually |
| Debt | $0! |
| Assets | $15,000 (savings) + $80,000 (401k) + $8,000 (Roth) + $9,000 (Robinhood) = $112,000 |
Given the above, how far is Non-Six-Figure FIRE from financial independence and/or early retirement? Using the 4% rule and annual expenses of $54,000 gives us a FIRE target of $1,350,000 ($54,000 / .04 = $1,350,000).
Read also: What is the 4% rule Or (How much do I need to retire?)
Their net earnings (incl. 401k contribution) of $72,900 with an annual spend of $54,000 yields a savings rate of 25.93% (($72,900-$54,000)/$72,900).
Let’s throw that into the number-verse to see how long it will take for NSF FIRE to FIRE!:
| Year | Balance | Savings | ROI | Total |
| 1 | $112,000.00 | $18,900.00 | $6,720.00 | $137,620.00 |
| 2 | $137,620.00 | $18,900.00 | $8,257.20 | $164,777.20 |
| 3 | $164,777.20 | $18,900.00 | $9,886.63 | $193,563.83 |
| 4 | $193,563.83 | $18,900.00 | $11,613.83 | $224,077.66 |
| 5 | $224,077.66 | $18,900.00 | $13,444.66 | $256,422.32 |
| 6 | $256,422.32 | $18,900.00 | $15,385.34 | $290,707.66 |
| 7 | $290,707.66 | $18,900.00 | $17,442.46 | $327,050.12 |
| 8 | $327,050.12 | $18,900.00 | $19,623.01 | $365,573.13 |
| 9 | $365,573.13 | $18,900.00 | $21,934.39 | $406,407.52 |
| 10 | $406,407.52 | $18,900.00 | $24,384.45 | $449,691.97 |
| 11 | $449,691.97 | $18,900.00 | $26,981.52 | $495,573.48 |
| 12 | $495,573.48 | $18,900.00 | $29,734.41 | $544,207.89 |
| 13 | $544,207.89 | $18,900.00 | $32,652.47 | $595,760.37 |
| 14 | $595,760.37 | $18,900.00 | $35,745.62 | $650,405.99 |
| 15 | $650,405.99 | $18,900.00 | $39,024.36 | $708,330.35 |
| 16 | $708,330.35 | $18,900.00 | $42,499.82 | $769,730.17 |
| 17 | $769,730.17 | $18,900.00 | $46,183.81 | $834,813.98 |
| 18 | $834,813.98 | $18,900.00 | $50,088.84 | $903,802.82 |
| 19 | $903,802.82 | $18,900.00 | $54,228.17 | $976,930.99 |
| 20 | $976,930.99 | $18,900.00 | $58,615.86 | $1,054,446.85 |
| 21 | $1,054,446.85 | $18,900.00 | $63,266.81 | $1,136,613.66 |
| 22 | $1,136,613.66 | $18,900.00 | $68,196.82 | $1,223,710.48 |
| 23 | $1,223,710.48 | $18,900.00 | $73,422.63 | $1,316,033.11 |
| 24 | $1,316,033.11 | $18,900.00 | $78,961.99 | $1,413,895.09 |
Boom! If nothing changes (doesn’t move, never gets a raise, etc.), it will take NSF FIRE ~23.5 years to FIRE. Given that they’re mid-30s–let’s call it 35 for simplification–that leads to retirement at 58.5 years old. That may not be super early retirement, but it’s still 6.5 years ahead of the norm.
But wait! NSFF mentioned they were open to potentially moving to save $500 per month and also freelancing for about $500 per month.
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Moving & Freelancing Analysis
Moving and reducing rent by $500 will bring NSFF’s monthly expenses down from $4,500 to $4,000 per month and reduce annual expenses from $54,000 to $48,000.
Freelancing for $500 per month (let’s assume that’s gross) would yield roughly $350 more in earnings per month (using 70% again as we found from smart asset).
Our new FIRE target is now $1,200,000 ($48,000/.04) down from $1,350,000. Now that costs/expenses are down and income is up, let’s see what effect that has on savings and how much quicker we can FIRE!
| Year | Balance | Savings | ROI | Total |
| 1 | $112,000.00 | $29,100.00 | $6,720.00 | $147,820.00 |
| 2 | $147,820.00 | $29,100.00 | $8,869.20 | $185,789.20 |
| 3 | $185,789.20 | $29,100.00 | $11,147.35 | $226,036.55 |
| 4 | $226,036.55 | $29,100.00 | $13,562.19 | $268,698.75 |
| 5 | $268,698.75 | $29,100.00 | $16,121.92 | $313,920.67 |
| 6 | $313,920.67 | $29,100.00 | $18,835.24 | $361,855.91 |
| 7 | $361,855.91 | $29,100.00 | $21,711.35 | $412,667.26 |
| 8 | $412,667.26 | $29,100.00 | $24,760.04 | $466,527.30 |
| 9 | $466,527.30 | $29,100.00 | $27,991.64 | $523,618.94 |
| 10 | $523,618.94 | $29,100.00 | $31,417.14 | $584,136.07 |
| 11 | $584,136.07 | $29,100.00 | $35,048.16 | $648,284.24 |
| 12 | $648,284.24 | $29,100.00 | $38,897.05 | $716,281.29 |
| 13 | $716,281.29 | $29,100.00 | $42,976.88 | $788,358.17 |
| 14 | $788,358.17 | $29,100.00 | $47,301.49 | $864,759.66 |
| 15 | $864,759.66 | $29,100.00 | $51,885.58 | $945,745.24 |
| 16 | $945,745.24 | $29,100.00 | $56,744.71 | $1,031,589.96 |
| 17 | $1,031,589.96 | $29,100.00 | $61,895.40 | $1,122,585.35 |
| 18 | $1,122,585.35 | $29,100.00 | $67,355.12 | $1,219,040.47 |
By reducing rent by just $500 and freelancing to net $350 more per month, NSFF has shaved SIX years off of their retirement.
While a net change of $850 per month doesn’t seem like a ton, you can see that annual savings grows from $18,900 to $29,100 per year. NSFF just went from retiring in their late 50s to their early 50s!
That is awesome, but can we do even better?
Moving, Freelancing & Geoarbitrage Analysis
NSFF has one more trick/option up their sleeve. They are open to relocation after they retire. That would significantly change their monthly and annual expenses.
In this scenario, let’s continue using the figures from above where NSFF moves and begins freelancing. That keeps our FIRE target at $1,200,000 ($48,000 / .04).
I recently wrote a Puebla cost of living analysis, so we can use numbers from both Puebla and Mexico City.
In Puebla, we spent $1,633.50 across 28 days. To normalize that, let’s multiply by ~1.07 (30/28) to get a full month’s estimate: ~$1,750 ($1,633.50 * 1.07). Annually, that’d be $21,000. Using that annual expense, we get a FIRE target of $525,000 ($21,000/.04).
In Mexico City, we spent $2,341.31 across 30 days. Annually, that’d be $28,095.72. That gives us a FIRE target of $702,393 ($28,095.72/.04).
Let’s go back to the previous table to see what these new FIRE targets yield this time around:
| Year | Balance | Savings | ROI | Total |
| 1 | $112,000.00 | $29,100.00 | $6,720.00 | $147,820.00 |
| 2 | $147,820.00 | $29,100.00 | $8,869.20 | $185,789.20 |
| 3 | $185,789.20 | $29,100.00 | $11,147.35 | $226,036.55 |
| 4 | $226,036.55 | $29,100.00 | $13,562.19 | $268,698.75 |
| 5 | $268,698.75 | $29,100.00 | $16,121.92 | $313,920.67 |
| 6 | $313,920.67 | $29,100.00 | $18,835.24 | $361,855.91 |
| 7 | $361,855.91 | $29,100.00 | $21,711.35 | $412,667.26 |
| 8 | $412,667.26 | $29,100.00 | $24,760.04 | $466,527.30 |
| 9 | $466,527.30 | $29,100.00 | $27,991.64 | $523,618.94 |
| 10 | $523,618.94 | $29,100.00 | $31,417.14 | $584,136.07 |
| 11 | $584,136.07 | $29,100.00 | $35,048.16 | $648,284.24 |
| 12 | $648,284.24 | $29,100.00 | $38,897.05 | $716,281.29 |
With these new FIRE targets, we are looking at NSFF hitting FIRE in 12 or 9 years for retiring in Mexico City or Puebla respectively.
By being willing to leave the expensive Bay Area for cheaper cities abroad, NSFF can shave another 6-9 years off their retirement!
What to do with the savings?
To me, $15,000 in savings seems high and could potentially be better served being invested. However, lots of folks like to have 3-6 months of expenses in liquid savings as an emergency fund. NSFF’s monthly expenses at $4-4.5k per month, so this would only cover a little over 3 months expenses.
Depending on comfort level, NSFF can consider reallocating some of their savings into their brokerage account to try and make more than whatever interest they’re currently accruing.
Final Thoughts
As you can see above, you don’t need a high six-figure income to reach FIRE. Flexibility can trump income in cases like these.
NSFF’s willingness to reduce expenses (by way of moving to a cheaper place), picking up a freelancing gig to supplement their income, and being open to leaving the Bay Area and moving abroad to further reduce expenses in retirement.
Would you be willing to do any or all of the above to retire earlier?
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