Episode 140

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Published on:

8th May 2024

Does My FIRE Number Account for Inflation? | E140 Jesse Cramer

I love playing with compound interest calculators and one equation I’m routinely calculating is the number of years until I reach financial independence. Using the 4% rule, I multiply my living expenses by 25 to get my FIRE number. I use that, my current net worth and various contribution rates to predict when I’ll reach FI.

But then I started thinking about this equation. Instead of using my current expenses should I use an inflation-adjusted number that would more realistically match my future expenses? Also, now I’m second-guessing my average return rate. Does that include inflation or should I be adjusting that rate too?


All of a sudden, I’m a little turned around. Not knowing if the number in front of me is an undershot or overshot. I don’t want to be so far off the mark that my calculation isn’t giving me a realistic path to financial independence.


So what is the right way to account for inflation whenever running our numbers? Luckily Jesse Cramer is back so tell us the right way to go about this calculation.


Jesse has a way of simplifying topics. He is routinely doing this through his podcast, The Best Interest. Jesse takes complex financial topics and puts them into layman's terms. Jesse is so good at doing this that this is the 3rd time I’ve invited him on The Struggle is Real.


In this episode, we get straight into the topic of inflation and answer questions like why products get more expensive over time, 2 ways to correctly calculate your FI number, and how to protect your portfolio from inflation.


So if you’re ready for that, let’s get into it. I hope you enjoy my conversation with TSIR’s most frequented guest (for now)...Jesse Cramer.


Key Takeaways:

  • How products and services get more expensive over time
  • How inflation is measured
  • 2 ways to calculate your FI number without mistakenly leaving out or double counting inflation
  • Does the 4% rule account for inflation?
  • How to inflation protect your portfolio
  • How concerned a 20-something should be about inflation whenever retirement planning


Mentions:

Accounting for Inflation in Retirement and FIRE Planning: https://bestinterest.blog/accounting-for-inflation-in-retirement-and-fire-planning/


More of Jesse:

Podcast: https://bestinterest.blog/the-best-interest-podcast/

Blog: https://bestinterest.blog/


More of The Struggle is Real:

Find show notes and more at https://www.tsirpodcast.com/

Follow us on Instagram at https://www.instagram.com/tsirpod/

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About the Podcast

FI Minded: Achieve Financial Independence & Have Fun Doing It
Achieve Financial Independence & Have Fun Doing It
Want to achieve financial independence without missing out on the fun?

FI Minded is for anyone who wants to achieve financial freedom, live life on their own terms, and, most importantly, enjoy the journey along the way!

Whether you’re just starting to think about financial independence or already deep into the process, FI Minded gives you the tools and inspiration to make FI a reality - without giving up the things you love.

Each episode, we’ll cover topics like:
*Financial Independence Strategies: Simple, actionable advice to reach FI faster (if that’s your goal).
*Work Optionality: Transitioning from the corporate grind (no more "one more year syndrome") to a life of freedom and flexibility.
*Lifestyle Design: How to build a life that aligns with your values, goals, and dreams.
*Stories from the FI Community: Real people sharing their journeys to FI and what they’ve learned.
*Fun with FI: How to save your future and enjoy your current life through CoastFI, mini-retirements, travel, or just making the most of your time.
*Fighting Burnout: Balancing saving for your future while staying mentally healthy.

Some of our past guests include:
Carl Jensen (1500 Days), Jeremy Schneider (Personal Finance Club), Nick Loper (Side Hustle Show), Andrew Giancola (The Personal Finance Podcast), Jordan Grumet (Earn & Invest), Jill Sirianni (Frugal Friends), Jacking Cummings-Koski (Catching Up to FI), Jesse Cramer (Personal Finance for Long-Term Investors), Diania Merriam (Optimal Finance Daily), Rachael Camp (Work Optional), Jillian Johnsrud (Retire Often), Sean Mullaney (FI Tax Guy), Joel Larsgaard (How to Money), Erin Lowry (Broke Millennial).
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