I’ve been sitting at my computer for an hour playing with my budget and messing with the heat map.  Here’s one reason why things get harder.

I’ve been playing with numbers, seeing if I could cut anything in my budget or level up my job to accelerate financial independence, and I wasn’t making much progress.  Nothing was moving the numbers enough to inspire me.

Say you have a really high savings rate, like 90%.  Say also that you have a high income, let’s say $8000/month.  This means you’re spending $800 but savings $7200.  Let’s say you want to move to a 95% savings rate.  You can do this two different ways, cutting spending or increasing income.  On the spending side, there’s not much wiggle room.  Cutting $400 is just like giving up on eating.  Even if you were able to cut that spending by eating food from work, you won’t get that food once you stop working, so it doesn’t help you for independence.

On the earning side, in order to drop $800 to be 5% of your spending, you now need to earn $16000 a month.  That’s really difficult, especially b/c at this point your marginal tax home rate in California (after state tax, federal tax, social security, medicare, state disability, etc.) is only about 52%, so you would need to get a raise of $192k a year (actually more b/c that will bump you into a higher marginal tax bracket…) to make this happen.  There really aren’t many jobs w/ that kind of promotion opportunity.

Alternative: create a passive income stream of $400 to offset the spending.  I suppose other people have already come to this conclusion.  This is a very concrete way that taxes restrict high income earners from achieving FI.  It’s also another reason why it’s so much easier to achieve FI as a couple, especially among high income earners – you have the dual advantages of cost savings and tax relief.

I need to make some kind of thing showing a person how much money they need to save or how much of a raise they need to get to alter their FI timeline.

But wait!  Let’s look at the impact of cohabitation.  Let’s say you double yourself and marry somebody with the same income.  Likely they’ll only add another 50% to your efficient life, so now you’re spending $1200 on a monthly income of $16000.  That gets you all the way from 10 to 7.5.  Not bad!  To do this by yourself, you’d have to slash 25% of your personal budget.


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