April was another good month on my progress towards financial independence. My SWR went down to 49.50% from 54.50% the month before. My goal is to get my SWR down to 4% at which point I’ll consider myself financially independent. The safe withdrawal rate isn’t decreasing quite as fast as it was. Now that I will be making much less money the decreases will be even smaller but I’m hoping I can still decrease the SWR every month.
My goal is to save 50% of my income each month and I met that goal in April. I made $3815.80 and managed to save $2000. That amounted to a 52.41% savings rate. I didn’t put quite as much money in savings in April as I could have because I wanted to leave myself a little bit of a cash cushion with the tax job ending and my part-time job not being quite enough to cover my bills. My part-time job has turned into a full-time job so I will be able to decrease my cash a little and move that cash to savings.
The 4% SWR translates into having 25x your annual expenses in savings or 300 months of expenses in savings. I have 24.24 months of living expenses saved now. It is nice to have two years of living expenses in savings. Most of the money is in retirement accounts so it isn’t easily accessible, but it is still nice to know it is there.
The way I am determining my SWR is by tracking my trailing 12 months expenses divided by the amount of my investments. Since I don’t think the preceding 12 months accurately reflect my expenses going forward I am using my monthly expenses starting in November 2012 to set the average so every low month of expenses makes a big change in the average right now.