When Income Doesn’t Require Working Anymore

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A good daydream for normal people involves winning the lottery or scoring a lifetime pass to the Maldives. Good, normal thoughts. Mine used to be daydreaming that I was the only person left in the world because that meant I could now go into any restaurant and eat for free. No joke, that was my to-go daydream in middle school -_-

At age 13, the KFC on Taraval street was the first place I wanted to be after being left behind in the Rapture. Even back in those school days, I was a pig.

(Valerie I hope you’re reading this and I hope you’re laughing.)

But more common with me lately has been a daydream of outperforming the market, which is probably just as insane. Just think about when income, in the long run, could become irrelevant compared to growth. When your income doesn’t have to come from working anymore – holy moly, wouldn’t that be a beautiful sight?

Related: Why Rich People Penny Pinch When They Don’t Have To?

Our Partnership

So Hubby and I started sharing the responsibilities of teaching ourselves topics related to investing. It’s one helluva convoluted subject and everyone gets to set their own spice blend.

We don’t learn the same things and it’s clear we do not process the information the same way, at all. He is going towards alternatives forms of investing and I stick with my Boglehead derivatives. Then we come together and merge minds. That’s what we’ve been doing with our spare time when we have the time. We discuss, inquire, and explain what we learned to each other.

It’s a very slow process as you can imagine, but we both learn better this way. Plus we have a while to go until we hit that FI point (formula below). There’s no “yolo” here yet. We are trying to use both our personalities to our advantage as a partnership because much about investing is understanding self. The natural brief is if we can teach each other in a sufficient way that means we have absorbed it correctly and that’s the first step.

Safety First

Our real point for fatFIRE is safety as we’re naturally careful. Food isn’t as costly as a flight or hotel stay but it is indeed all I (mostly) need to be happyWhat did I want to do with the rest of my fatty FI time? Take the kiddies to ballet? Go back for more pole dancing fitness lessons? What’s oddball fun that requires a brain so I don’t turn into soup?

Less beach sand and campouts; more being in bed with all the time in the world, surrounded by take-out food and digging back into Security Analysis with hubby (which was basically what I did this entire weekend.) Throw a few hours of deep life passion projects in there and that’s the recipe for a great day.

My luxe condo box-fortia.

The reason for fatter financial independence is to have that margin of safety. It doesn’t mean we use it to live it up. Not into that, it’s really against this particular oddball’s programming, to be frank.

Related: Don’t (Nicolas) Cage Yourself In Financially



Here’s a random equation my Hippo came up with, it’s not anything complicated. Just solving for what returns to aim or salary or starting amount (ie money baby :P).


r1 = Passive Returns

r2 = Active Returns

S = Salary (After Tax; Before Expenses)

MB = Money Baby (Investable Portfolio)



r2MB = r1MB + S

S = r2MB – r1MB

S = (r2 – r1) MB

MB = S / (r2 – r1) 

All 4 solve for the same things basically.


A Typical Example

MB = S / (r2 – r1) 

$2,500,000 = $100,000 / 0.10 – 0.06

After decades of diligent saving and maybe some luck with a rich, dead uncle, you’re ready to hang up your day job. So let’s say you dedicate time to managing part of your portfolio and do the homework to generate a higher return rather than staying at a job you hate grinding away.

A typical household or individual making a salary of $100,000 annually will need a minimum of investable $2,500,000 assets returning at an annual average of 4% more to make it “worth it” enough to let go of the day gig. You would need to generate an extra 4% in returns to make up for the $100k salary with a 2.5mil money baby. If the S&P 500 did 6% then you aim for 4% on top of that. If one can do that then it makes sense to give up the day job and start hooking bigger fish.



An easy scenario above, no-brainer, but life isn’t easy. What impacts your numbers will be a huge component of other things like your initial capital (money baby) and income level. Then you have to figure out if assumed effort into managing your own portfolio would yield higher returns that could beat the market. That is not an easy feat for us peasants without a crystal ball or decent diligence.

Then you have to neglect the fact that, without a job, you will not have health insurance and that will always be another wild card in the deck. Lastly, you would also have to assume your expenses will be the same. That’s hard to say. Perhaps without a job, it’s possible to move to a lower cost of living area and geoarbitrage your savings that way.



In a nutshell, the formulas are not perfect. There are various factors that will impact this formula that goes beyond just math. Income is not the only reason why people choose to work. Some people find meaning in their work and would never give it up. Some people hate their soul-sucking job and would live happier, longer lives without one. That is up to the individual. Portfolio returns are never guaranteed. We are all trying to figure out at what level do those diminishing returns make it worth it.

Related: Would You Survive a Financial Depression?

Besides that, according to the math, the rich indeed get richer. That’s one reason why Warren Buffett doesn’t beat the market anymore. Imagine his position in any value stock would immediately flood it and there’s very little value right now for his gargantuan sum. Compounding is powerful. Put strong returns and the two together and most of everything that trips us up today becomes irrelevant. That’s why I stress when frugality stops being fun and money isn’t a problem to let go of the small things.



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33 thoughts on “When Income Doesn’t Require Working Anymore”

  • Lots of math in this post. Nice.
    You also have to remember the downside too. Beating the market during the good times usually means you’re taking on more risk. More risk usually means you’ll lose more during the down years.
    Some people (Buffett) can supercharge their returns, but not me. I’ll stick with mostly passive investment. Good luck!
    Joe @ Retire by 40 recently posted…Can You Become A Millionaire?

    • Thanks =) I’m curious about a downturn and how we would make out, we shall see. I want some experience and street cred on that front. I’m not good with leverage I know that. Lots of time and life to learn! I read Buffett is super conservative and missed out on tons of returns during the good times. He stuck to his guns and didn’t get crushed during the bad so he still came out ahead.

  • I love your analysis on the $2,500,000 and targeting an annual return of $100k although 10% is doable nowadays, the key is guaranteed income. Depending on the retiree’s age, an annuity may also be considered.

  • Just like Joe said, it’s really about risk tolerance. At you current net worth/ net worth trajectory, and your household income, i think beating the market just isn’t quite worth the hassle factor.

    At this point even if you guys just track the market, your net worth is going up six figures plus a year lol…. That’s insane! Either way, kudos to you both. I’m definitely about exploring different ideas and strategies though. Cheers!
    Half Life Theory recently posted…Life After Financial Independence 001

    • Thanks! It depends on portfolio size, we would need 5 million to make it worth it. It’s not too impossible in the good times but good times don’t stay.

    • YES!! Perma study group buddy! Do it. Oh god you two are smart as heck!!!

      Active is like if we managed it – pick a few strong businesses or small/med caps. Passive is if you just dumped it into domestic stocks or your regular 80/20 blend.

  • My wife and I would love to try and beat the market, but I think we just need to learn more about stocks. We have had swings going both ways and just came to the realization that index funds were the way to go for us. I’ts a lot less work and stress. for us, but maybe someday we will try again. Would love to hear some of the stocks you both hold, and hope all the best.

    • We’ve beaten the market but it was luck haha. I don’t give details because it’s SUPER personal (and nothing is concrete). There’s a lot of liabilities in giving away that information or telling people what to invest/what not to I think. Investing is like…a personal jesus to me. Not sure if that makes sense :p

  • Great you two compliment each other investment wise. When two heads come together with different vantages a better solution can often be obtained.

    As far as your equations, the math does make sense. Once passive returns can handle your lifestyle you are set and can ditch the salary component

  • OMG I used to daydream that the world would just pause for a while and I can eat any snacks I want at the store lol Restaurants would be great too, but I particularly liked beef jerky and those flavored dry plums/fruit back then. Now I just daydream about traveling the world and eating whatever I want. Not sure what I’ll daydream about once I can do just that 😀

    The math looks great!

  • Keeping track of the small things keeps me grounded even when active income becomes irrelevant and insignificant to portfolio returns . Just like the good old early days of training and 💪building.

    Though you’re right that a $4 coffee makes no difference to fatFIRE when the time to considering this small decision is better spent on more important decisions.

  • Lol the Taravel St reference…actually went there the other day for some banh mi sandwiches and pass by that KFC/Taco Bell you mentioned by the library.
    Those formulas both of you created is pretty sound, really liked how the both of you brainstormed and came up with them.
    Kris recently posted…My Summer Reading Recap

  • Okay, I am in love with the term “Money Baby” and am super jealous I didn’t come up with that. It’s fucking hilarious.

    Fat FIRE has a ton of appeal to me but we’re going to either have to retire much later or earn a lot more income to make that shit happen. So, regular old FIRE for us….for now. 🙂

  • I actually hate the concept of the “rich uncle” or any kind of inheritance really. Receiving that money means the person giving it is dead, and I’d rather still have the person. That and hopefully we will be old enough before any of that sort of thing comes to us that we should be financially solvent on our own.

  • I want to know how you got that chicken drumstick to have a spasm. I think I am more in the camp of the soul-sucking job. 10% seems a high hurdle. If I had to earn 10% on my money, I think I would remain in my soul-sucking job. Great post

  • I think you’re right about pursuing FatFIRE. Having a very high savings rate is great but life needs to be lived while you’re able to enjoy living it. What’s the point in forced frugality which makes you miss out on enjoyable experiences along the way? Life is a roller coaster and not a destination. You need to enjoy yourself along the way.

    I admire your mathematical attempts to find this ideal level of income for obtaining FatFIRE. It’s always good to run through the numbers to give you a ballpark of where you need to land.

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