If you follow big name financial independence bloggers, you’ll notice that there’s a growing trend advocating we put our emergency fund in the stock market.
The theory is that an emergency fund is for people who don’t have the foresight to manage their money properly. But we’re financial independence enthusiasts, we know what we’re doing.
Although this is correct for most people, we Australians have a unique product that has both the liquidity of a savings accounts and the return of the stock market. It’s the mortgage offset account.
But where’s the best place for our emergency fund? Does the offset account trump the market? And if we don’t have an offset account, can we feel comfortable putting all our money in the stock market?
Many of us in the financial independence community like to consider ourselves non-conformists. While the masses are deep in consumer debt and locking themselves into years of work, the rest of us are being smarter with our money and setting ourselves up for a long life of leisure.
But at the same time, we all praise the 4% Rule like it’s gospel without questioning whether it applies to early retirees, particularly us way over here in Australia.
Over the last few months we’ve been deep in safe withdrawal rate analysis to test whether the 4% Rule actually works for us Aussies — or whether it’s not quite as ‘safe’ as we think.
This article stitches all that analysis together and introduces a simple tool for us to determine the exact safe withdrawal rate that applies to our individual circumstances and risk tolerance.
I think it’s good to take some time every six to twelve months to evaluate the progress of our journey to financial independence. Not only is it motivating to recognise our progress, but we can also identify areas where we are falling short and develop ways to improve.
With that in mind, here is my year in review for 2018. I review my Profit and Loss statement and Balance Sheet for my entire financial independence journey, describe how my money flows between accounts, and share my successes and failures.
Plus there are a few little announcements at the end!