FIRE Financial Freedom Practice: Calculating how much I need to save starting from the age of 30 (including spreadsheet + real savings rate)

1. The real situation of my FIRE (for your reference)

• my target number

  Lean FIRE (basic life) is about 15 million, Coast FIRE (no longer working for money but retains interest) is about 25 million, and Fat FIRE (comfort in first-tier cities) is about 40 million. The difference is not the price, but "how much flexibility you want to retain."

• Why is it wrong to use the 4% rule in Taiwan?

  The 4% principle is calculated by the US Trinity Study based on S&P 500 + US debt. Taiwan's stock market is highly volatile, taxes are different, and health insurance is a lifelong burden. I use a 3.5% safety rate and budget health fees + house taxes + emergency funds separately.

• My current true savings rate

  Actual income after tax and labor and health insurance deductions: savings + investment about 45-50%, living expenses 30%, entertainment interests 10%, emergency fund 10%. It was 30% when I first started working and gradually increased. 45% is not reached on day 1, but is slowly adjusted over five years.

• My Portfolio (Public)

  0050 / 0056 / VT / VOO + some US stocks + cash 8 months living expenses + a small amount of investment insurance policies. I deliberately diversify Taiwan + the United States because the single market black swan is too scary.

2. What is FIRE?

• Financial Independence

  Passive income (investment returns, rent, etc.) is greater than or equal to daily living expenses, and there is no need to rely on work income anymore

• Retire Early

  It doesn’t mean not working at all, but having the freedom to choose to do what you really want to do and no longer being tied to a salary.

• 4% rule

  The core formula of FIRE: Withdraw 4% of your portfolio each year and not spend it all in 30 years. In other words, the assets you need = annual expenses × 25

• origin

  The concept originated from the 1992 book "Your Money or Your Life" and has formed a global social movement in recent years.

3. Different Types of FIRE

4. Calculate your FIRE number

• Step 1: Calculate annual expenses

  Account for 3-6 months, find your average monthly expenses, and multiply by 12. Remember to include irregular expenses such as insurance, taxes, travel, etc.

• Step 2: Multiply by 25

  Annual expenses × 25 = your FIRE number. For example, monthly expenditure is 40,000, annual expenditure is 480,000, FIRE number = 12 million

• Step 3: Calculate the current gap

  The FIRE number minus the current net assets (deposits + investments - liabilities) is the amount that still needs to be accumulated.

• Step 4: Estimate completion time

  Based on your savings rate and investment return rate, calculate how many years it will take to reach the target

5. Savings Rate: FIRE’s Accelerator

• Attack big expenses first

  Housing and transportation typically account for 40-60% of spending. Reducing spending on these two items has the greatest impact on the savings rate

• Automate savings

  Automatically transfer your salary to your savings/investment account immediately after it is credited, "pay yourself first"

• increase income

  There are two ways to increase your savings rate: reduce your spending and increase your income. Developing a side hustle or improving professional skills is equally important

• Avoid lifestyle inflation

  When you raise your salary, don’t increase your consumption level at the same time. Put the increased income directly into savings.

6. FIRE investment strategy

• Mainly index ETFs

  Investing in global markets or Taiwan stock index ETFs (such as 0050, 006208, VT, VTI) does not require stock selection, and the long-term average annual return is about 7-10%

• Asset allocation

  Match stocks and bonds based on risk tolerance. Common allocations such as 80% stocks + 20% bonds, adjusted for age

• Regular quota

  By investing a fixed amount every month, there is no need to judge the timing of entering the market, and the average effect of buying low and buying high is automatically achieved.

• Don’t time your entry and exit

  FIRE's investment philosophy is "Buy and Hold", no short-term trading, no guessing on the rise or fall.

• reinvested dividends

  Reinvest dividend income to maximize the effect of compound interest

• Control investment costs

  Choose ETFs with low management fees (annual fees 0.1%-0.3%) and avoid active funds with high fees

7. Advantages and challenges of practicing FIRE in Taiwan

• Advantages: health insurance system

  National health insurance makes medical expenses controllable, unlike the United States where you have to worry about high medical insurance costs. This is the biggest advantage of FIRE in Taiwan.

• Advantages: Reasonable cost of living

  The cost of living in areas outside the Shuangbei is relatively low, especially food and transportation costs are much cheaper than in Europe and the United States.

• Advantages: Labor retirement system

  The 6% self-withdrawal under the new labor retirement system not only saves taxes but also accumulates retirement savings, which is an additional safety net.

• Challenge: High housing prices

  The house price-to-income ratio in the two norths is relatively high, and housing expenses may reduce savings space. Renting vs. buying a house requires careful calculation.

• Challenge: Limited salary growth

  Average salary growth in Taiwan is slow, and increasing the savings rate may require more efforts to control spending or develop side jobs.

• Challenge: Investment market restrictions

  The Taiwan stock market is small and concentrated in the electronics industry. It is recommended to use overseas ETFs to diversify risks.

8. Life plans after FIRE is achieved

• Find your "why"

  FIRE is not about escaping from work, but about pursuing a more meaningful life. Think ahead about what you will do after retirement

• Maintain social connections

  It is easy to lose your social circle after leaving the workplace. Establish communities and relationships outside of work in advance.

• Stay healthy physically and mentally

  Once you have time, devote yourself to sports, studies and volunteer activities to make your retirement life fulfilling and purposeful

• Flexible Withdrawal Strategy

  Reduce withdrawals when the market falls and spend more when the market rises to make your assets last longer.

• retain earning capacity

  Even after achieving FIRE, maintain certain professional skills and work abilities as a safety net in worst-case scenarios

9. 5 actions you can take now

• Start accounting

  Understanding where your money is going is the foundation for calculating your FIRE number and increasing your savings rate

• 6% bonus for self-retirement

  Apply to the company now, it’s the easiest way to save taxes + save

• Open a securities account

  Choose a brokerage with low handling fees and start regular fixed-amount investment 0050 or 006208

• Calculate your FIRE number

  Only when you know where your goals are are you will have the motivation to move forward. Calculate it using the formula above

• Read a FIRE book

  Recommend "Getting Rich Mindset", "Getting Well With Money" and "Simple Getting Rich" to establish a correct view of money.

10. 4 mistakes I made on my FIRE journey

• ❌ In the first year, I only bought 0050 and did not make any allocation to US stocks.

  As a result, the overall position fell by 20% during the unilateral correction of Taiwan stocks in 2024. After adding VT later, the fluctuations were significantly smoothed. A country ETF is not diversified enough and should at least match Taiwan + the United States + some emerging markets.

• ❌ Use "current prices" to calculate retirement figures

  The FIRE number must account for inflation. I used 2.5% annual inflation compound interest to calculate that the actual purchasing power of Lean FIRE, which was originally "15 million is enough", 20 years later will be equivalent to the current 9 million, which is a big difference.

• ❌ Sacrifice total return for high dividends

  0056 / High dividend ETFs seem to be very reassuring in terms of "receiving money every month", but the long-term total return is usually lower than 0050. I once put 30% of my position in high dividends, but later adjusted it back to less than 10%, and the total return improved significantly. The focus of the FIRE accumulation period is total return, not cash flow.

• ❌ Ignore tax planning

  There is a big gap between Taiwan’s 28% separate taxation of dividend income and the consolidated declaration; overseas income is tax-free up to RMB 6.7 million but has a basic income tax threshold of RMB 1 million. One year, I almost suffered excess tax on overseas dividends, and then I learned minimum tax seriously.