Our Freedom Fund: Creating a Portfolio That’s Built to Last

Welcome to the first monthly update on our financial independence journey. We’re getting closer to the finish line and will be updating you on our progress as we near financial independence.

Yes, ladies and gentlemen, we’re almost there! We expect to meet our target by July 2017.

What does this mean for us?

It means we’ll have enough investments to live on without ever having to work to cover living expenses.

Would we abruptly quit our jobs once we reached FI?

Not right away, though we’d love to start traveling for longer periods of time. Other steps must be taken before we can take action on retiring. We’ll have to make the transition in stages. Unless the daily grind irritates us enough to quit, we’ll keep working just a little bit longer. 

The FI journey so far

We’ve been working toward financial independence since 2011. We’ve made so much progress in such a short period of time that the years begin to blend together. We can go back in time, thanks to technology, and see when it all started.

My book purchases below transport me back to a time when I was more interested in living an awesome debt-free life. This was also the time when we realized we didn’t have to work for money until we were in our 60s. (The novels were only available as free downloads.)

Our spending habits have shifted so drastically that we no longer purchase books. Our library has become our primary source of reading material.

Between July 2011 and March 2012, I read about: 1) How to spend your money to get the life you want. 2) Debt settlement negotiation strategies 3) The lifestyle of real millionaires. 4) Intelligent investing. 5) Finally, how money is your life energy, also known as Your Money Or Your Life. Other books on the list influenced us as well. 

Screen shot of my book purchases

We’ll need to sell our investment property after we reach FI and take care of other financial priorities. We intend to retire and relocate abroad.

The last thing we want to do is deal with the hassles of managing that specific property while living in another country. We’ll eventually get back into physical real estate, but for now, we’re stockpiling REITs.

We reported about a year ago that it would take us about three more years to reach FI. Other priorities included purchasing a home/investment property and saving money to help our parents.

We have divided our financial goals into stages. The first stage is to get to FI. We’ll continue to meet other financial objectives after we reach FI.

Redefining our Freedom Fund

We’ll consider ourselves financially independent when our investments (Freedom Fund) can support a $35,000-a-year lifestyle. The average retirement period is 30 years. Since we have a much longer time horizon than the average retiree, we’re building a portfolio that will last. We need these funds to last at least 60 years, with annual inflation adjustments. The asset allocation model we’ll use has a 92 percent chance of success.

Our Freedom Fund’s sole purpose will be to cover our living expenses. To begin, we secure the funds necessary to exit the rat race by continuing to invest in stocks, REITs, and bonds. Second, we work on more flexible financial targets.

We have options!

What do we mean by having flexible goals?

First and foremost, we do not need to buy a house. We can continue to rent an apartment indefinitely once we are financially independent. If we want to buy a nice house in the future, we can put in a little more effort. That framework allows us to quit our jobs whenever we want after we reach FI.

In our calculations, we have the option of purchasing a more affordable house. In our Freedom Fund, we’re including $10,000 a year in income to cover our rent (adjusted annually for inflation). If we decide to stop working and buy a house, we can take the $10,000 to cover the mortgage on a house.

After our Freedom Fund is fully funded, we’ll be done saving for retirement. BANG!!! We will be able to complete what is marketed to us as a 35-40 year endeavor in less than ten years.

For people who are in debt on a regular basis, $35,000 per year may seem realistic for an annual budget. They may even believe that living on such a low income is a huge sacrifice. When you’re not paying monthly debt interest and upgrading cars every four years, your money can go a long way.

How much interest do you pay on your auto loan, mortgage, and credit card debt?

Subtract that from your annual expenses and you’ll understand what I mean.

How much extra is that new car costing you in insurance and dealer services?

Subtract that from your living expenses, and our budgets become more comparable.

Life on $35,000 a year?

Where can we afford to live on $35,000 per year?

Almost anywhere, because our basic living expenses are so low! Our basic living expenses in Pennsylvania last year were around $24,000, which included housing, food, transportation, and a few extravagances.

Living abroad appeals to us more because it allows us to explore a whole new world of adventure. It’s less expensive and has a higher standard of living than here. We enjoy eating fruits and vegetables when we travel because they are picked at the perfect time. People in other countries are also more laid back and relaxed. That’s probably because they don’t have as hectic a lifestyle as we do.

The Freedom Fund will provide options

We reported in March that 72 percent of our eggs were in the Freedom Fund nest, and we revisited our journey to see how we got here. That figure did not only include our Fi number. It also included a sum for buying a property and moving expenses abroad.

We didn’t think it made sense to combine everything into one goal. As a result, the extra amount is removed from the FI calculations. Being financially independent means that we can leave our jobs and maintain the same standard of living. That is exactly what our Freedom Fund should reflect.

As a result, the percentage on the redefined Freedom Fund chart will appear slightly higher in prior months (prior to April) reporting because it is now a larger percentage of a smaller balance.

So far, the most important factor in our success has been reducing and tracking our expenses. Keeping track of them in Mint helped us become more aware of how we spent our money. We had some shocking expenses and decided to take action to eliminate them. We’ve come a long way since then, and we’ve been keeping track of our expenses for about five years.

Saving aggressively It’s not just for people with high-paying jobs or the wealthy. Some of our coworkers believe we are in a unique position to do this. The truth is that they earn comparable wages.

If they so desire, they can also plan an early retirement. It’s true that life has been simpler for us without children. However, we believe that children are only as expensive as their parents make them.

We recognize that early retirement is not for everyone. Some people don’t mind sitting in a cubicle all day or attending an endless number of meetings. That’s not our usual cup of tea.

We prefer to take our own path and are not afraid to stand out. We will continue to invest regardless of what the market does. One day, our Freedom Fund will become our primary source of income, albeit passive income!

Dividend Income

We expect dividends to contribute significantly to the annual income we expect in retirement. The remainder should be derived from capital gains. We only invest in mutual funds and ETFs, so we don’t do stock picking. The target dividend amount is $17,500 per year.

For the second quarter, we earned $3,474.09 in dividend income. For the last four quarters, our total dividend income was $13,980. We are $3,520 short of our dividend income target!

Freedom Fund percentage reached

We reached 85 percent of our Freedom Fund goal in June. Yay! This is up from 83 percent in May. Our Freedom Fund is made up of mutual fund investments, short-term reserves, and real estate. We gained little ground due to market drops, primarily due to Brexit, but dividends helped to cushion the blow.

The Freedom Fund will cover our living expenses in retirement.

Freedom Fund percentage reached since marriage

The Freedom Fund has only had one dip in the last ten quarters, in the third quarter of 2015. If a recession occurs, it will take much longer than a few months to return to 100 percent.

If we enter a bear market, it could take years to reach our destination. However, this would provide buying opportunities while we are still in the accumulation stage. Whatever the future holds, we’re laying a strong foundation to weather any financial crisis.

Will the Fourth of July 2017 bring us financial independence? That is a very attainable goal. Meanwhile, we will continue to enjoy our journey!

How are your financial goals coming along?

Risk disclosure: All investments involve some level of risk, including the possibility of losing principal. The information on this website is provided for discussion purposes only and should not be construed as financial advice.


After dedicating 13 years of his career to Vanguard, José retired from the corporate world at the young age of 44. During his tenure at Vanguard, he expertly coordinated the production of both electronic and print educational materials for 401(k) participants. Now, he relishes in his early retirement, cherishing time spent with his family, indulging in his favorite hobbies, seeking out new experiences, and savoring meals in the comfort of his own backyard.

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M.C. Cheamp
M.C. Cheamp
7 years ago

Very inspirational! Congrats on getting this far in your journey. Are you able to share more details on how you were generating this level of income (what you’re invested in and/or a ballpark principle amount)?

7 years ago
Reply to  M.C. Cheamp

Thank you! If you’re referring to our dividend income. We invest in index funds and are investing a large portion of our new non-retirement investment money in a high dividend yield index fund that generates over 3% in dividends. Large caps generate most of the dividend income but we’re diversified in different asset classes. The key here is to stick to an asset allocation that works for us.
As far as our job income, we work as project managers and have been with our current company for about 10 years. I didn’t save much during the first years, except for 4% of the salary to meet the company’s match. We don’t have 6 figure salaries but get paid decent salaries. As I paid off debt, we continued to increase our savings rate. We’d be able to share more details after we retire.
We’ll have an updated post on our asset allocation soon and will touch upon how we are invested. Thank you for reading!

Bladimir Mercedes
7 years ago

Nice to see you guys make some progress on your well documented journey, truly inspiring. Happy 4th of July & Financial Independence Day!

7 years ago

Hi Blad,
It’s great to get a comment on the 4th of July. I didn’t think anyone would be reading. We’re glad to be an inspiration to others. Happy Independence Day to you as well.

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