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The Plan

Assumptions

• 10k base net income
• 10% net income raise every year
• 0.29% monthly inflation (~3.54% yearly)
• 0.33% monthly risk free rate (~4.03% yearly)
• 0.35% monthly multi-market rate (~4.28% yearly)
• Invest 30% of net income every month
• Conservative portfolio allocation:
  • 30% on inflation protection
  • 30% on risk free bonds
  • 40% on multi-market funds

These assumptions should yield:

• Real returns of 0.035% monthly
• Real income increases of 6% every year

Theoretical Performance

Using an expected monthly return of ~0.035%, the total wealth $W$ at month $n$ is given by: $$ W(n+1) = W(n) \times 1.00035

• 3000 \times 1.06^{\lfloor{n/12}\rfloor} $$ Following this calculation, the expected date of Financial Independence is the end of year 2040, as show in the Wealth Expectation Calculator.

Implementation

1. Until the Emergency Fund is enough for a year of expenses, all investment goes into risk-free assets
2. After that, investment are made to balance the conservative portfolio allocation
3. Financial Independence is reached when a year of today’s expenses equals 5% of the emergency fund, meaning the total wealth should cover about 30 years of today’s standard of living.