Financial Independence

A Guide to Start your Plan of FI

In the PT profession, we write both short- and long-term goals for our patients. These goals determine our course during the sessions and ensures the effectiveness of our training and treatment. A guide that lets us know how to begin treatment, increase, or decrease exercise intensity and discharge our clients once our goals are achieved.

We even applied the physical therapy documentation process in establishing a financial baseline, knowing our strengths and weakness, and formulating our Plan of FI. This approach had allowed us to plan for the year 2020 and came out ahead despite the uncertainty.

Start living your life the way you imagine it to be.

When FI finds us, we will be at different stages and circumstances in life. Here are short-term goals you can make that will take you closer to your long-term goal of being Financially Independent.

1. Ask your “Why of FI

Begin with the end in mind. Lay down the track that will be your journey for the next few years. The answer to this question will be the framework that holds up your goals and the fuel that drives you when things get rough. Your “Why” is not set in stone. It will change as your life changes, but it will be the same at its core. True happiness

2. Know your Net Worth

Net Worth = Assets – Liabilities

Tally all balances from your savings, investment, and retirement accounts to know your Assets. The next figure you would need is your Liabilities, consisting all debts such as student loans, mortgage, car loans, personal loans, etc. This is your financial health and from here you’ll work to make it stronger.

3. Track your Income, Lifestyle Cost and Savings

Add all after-tax dollars you receive from all income sources for the month. Then tally your Lifestyle Cost in categories such as housing, transportation, food, travel, medical, shopping, entertainment, etc. We recommend doing this in categories so you can plan easier when it is time to optimize. Calculate Savings from here.

Income – Lifestyle Cost = Savings

No budgeting, accounting, or any action needed at this time. You just want to know how money comes and goes into your life.

4. Determine your FI number

This is a very important number to know even if you don’t want to retire early. It will give you a sense of enough both on the nest egg you need to accumulate and the years of life you must spend working.

FI Number = Annual Lifestyle Cost x 25

FI number is the amount of money you should have invested to support your lifestyle cost at retirement. Once you have this you can live off the cash flow from your investments. This opens a world of options for you from working less hours, extended time-offs to full retirement.

5. Estimate your FI timeline

Do you know how many years until work becomes optional?

FI Timeline (years) = (FI number – Net Worth) / Annual Savings

It is possible to change these numbers. Your FI number and Annual Savings can be tweaked by adjusting your lifestyle cost and your Net Worth can increase by acquiring Assets and eliminating Debt.

Take seemingly small and insignificant steps that will yield staggering results!

6. Build an emergency fund

Give yourself cushion to make good financial decisions. Having an emergency fund would make you less likely to stick to a job that you hate, get into high interest debt, or take money out of your retirement funds.

For starters, it doesn’t have to be huge. $1000 dollars could cover emergency expenses and get you to the next paycheck. Just make sure you only use it for real emergencies. Eventually aim to save at least 3 months of expenses or more depending on what would give you peace of mind.

7. Optimize Lifestyle Cost for happiness

Right down the 10 things that gives you true happiness in the present. (From the book Playing with FIRE) You’ll be surprised to know when all your basic needs have been met, you’ll be very happy with the simplest things.

Here are a few ideas on how you can optimize lifestyle cost.

Look at your Lifestyle Cost and revisit each line item with your 10 Things list in mind. Revise your lifestyle Cost reflecting your priorities and optimizing for happiness.

8. Plan to pay-off high interest rate debt

Get rid of debt with interest rates higher than expected returns from your investments. Typically, this is around 4%, but this will all depend on your level of comfort. You may be alright keeping your 2.5% mortgage around or may not want any debt of any interest rate hanging over your head, and so pay it off.

Include Debt payments in your Lifestyle Cost list to make them part of your priorities. Research on the Debt Snowball, by Ramsey Solutions, this method uses the power of small wins to keep you motivated in getting rid of pesky high interest debt.

9. Invest

This was a scary and confusing area of personal finance to me, but there is no other way around it. As the prices of everything increases, dollars you have now would not have the same purchasing power in a few years.

Investing in the stock market safeguards your dollars against inflation and lets you take advantage of the magic of compounding interest. Yes, there are risks but this is mitigated by investing regularly (dollar cost averaging) in low costs widely diversified index funds in a longer time horizon.

Start your FI journey NOW! Leave the days of not knowing where your paycheck went. Give yourself margin, so you can sleep better at night. Build your present life and secure retirement by asking what you want your life to look like and take the next logical step to take you there.

What are you currently working at in your Plan of FI? Do you know of any other steps that we may have missed? Tell us in the comments or visit us on our Facebook page!

About Us

We are a Pinoy Physical Therapist duo living somewhat unconventional but intentional lives. In this podcast we want to learn how Filipinos all over the world in different industries and walk of life earn, spend, save and invest money to achieve Financial Independence.

Follow us on YouTube for more podcast interviewslife and travel tips! If you have questions and suggestions please leave a comments below or visit our Facebook Page. See you soon!


We are NOT certified financial advisors, analysts, or CPAs. Investing strategies shared in this article and the website are not financial advice, but our own opinions that are for educational purposes only. We want you to treat our content as a preview to do your own research so you can make smart financial decisions.

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