LeanFIRE: A worthy goal for any man

I DO NOT TIRE OF SPEAKING OF THIS.

I’ve been sharing FIRE and leanFIRE for years

FIRE meaning financial indepedencen, retire early….and it’s even more important today, in light of

  • COVID-19 that up-ended the entire world
  • Russian’s illegal invasion into Ukraine and terrorizing Europe and the world
  • China’s extended zero COVID policy (and not keen to bring in “western” vaccines)
  • the great resignation
  • how so many companies shrunk and terminated so many employees

If you have started your leanFIRE journey for at least 10+ years:

  1. you’d have an overall lowered and leaner lifestyle of lower expenses
  2. you’d have amassed an amount of cash-paying assets, be it dividend stocks, REITs, rental properties etc

which would help to make you a little more resilient towards these sudden world changes past couple of year.

Mathematical assumptions

Assuming you’d been living off $2K/month (so total $24K/year) and investing $2K/month (so also $24K/year) into dividend stocks.

Assuming the dividends are 6% per year, and you reinvest every single dividend dollar, by the end of 10 years, you’d have: $335,319.42

Your dividends of 6% of $335,319.42 from year 11 onwards will be $20,119.16. Divided by 12 months, that’d be $1,676.60 dividends a month.

That’s not bad, if you’re “only” spending $2K/month, because $1,676 is “only” 16% short.

Is 16% short okay, Nigel?

I take an optimistic approach, because frankly, you’d already have 84% of living expenses sorted out with your dividend income. The shortfall is around $330 bucks. A MONTH.

ANY part time job or side gigs can cover that short fall, because you’re very close to leanFIRE / coastFIRE.

So yes, 16% short isn’t too bad in my books.

So even if I lose my job, I know and am assured that 84% of my expenses are sorted, I just need a little part time work to cover that shortfall. If I still have a job, I’ll keep investing $2K/month and reinvesting the dividends for a good 3-5 years (up to a buffer of at least $3K/month in dividends).

How much to invest in dividend stocks?

This can be fairly subjective, so I’ll tell you how I personally do it.

I carve out a percentage of all my income for investment, around 20%, and of this 20%:

  • 80% goes into stable, cash paying dividend stock (including real estate, business trusts and REITs)
  • 20% goes into higher-risk-higher-return stuff such as cryptocurrency and growth/tech stocks

So I dont wonder about a specific amount, but work on a percentage.

Say I earn $4000 a month; so 20% of this is $800; and 80% of $800 = $640 to invest into cash-paying investments per month. Then I can invest monthly or quarterly.

That’s it – no need for overthinking and overcomplicating things.