The EarlyRetirementEarl Financial Freedom Compass – Phase 2: The Accelerator
Lesson 26: Calculating Your Core Spending
In the last lesson, you calculated your FI Number. For many, that number looks like a mountain. But here’s the secret: You don’t have to climb the whole mountain if you can lower the peak.
Today, we are going to find your Core Spending—the actual cost of a life you love—and distinguish it from the “fat” that’s currently slowing you down.
1. The Lever: Why Core Spending Matters
Most people calculate their FIRE number based on what they spend now. But your current spending is likely inflated by the very job you’re trying to leave.
The Math of the Lever:
- Spend $5,000/mo: You need $1,500,000.
- Spend $4,000/mo: You need $1,200,000. That $1,000 difference in monthly spending just “saved” you from having to grind for an extra $300,000.
2. Identifying the “Work Tax”
When you retire, certain costs vanish instantly. We call this the Work Tax. Look at your current budget and identify:
- Commuting: Gas, tolls, and the brutal wear and tear on your car.
- The “I’m Tired” Tax: Expensive convenience meals because you’re too drained to cook.
- Professional Wardrobe: Dry cleaning and clothes you only wear to sit in a cubicle.
- Social Pressure: The $15 office lunches and the “happy hours” you attend just to vent about work.
3. Frugality vs. Misery: The “Joy Audit”
I am a huge fan of ruthless frugality, but I am an even bigger fan of quality of life. If you cut things that actually bring you joy, you will relapse (remember Lesson 24?).
Open your 5-Tool Calculator Suite and go to Tab 1 (Expense Tracker). Label every expense with one of three categories:
- Non-Negotiable: Housing, basic groceries, utilities, insurance.
- High Joy: That one hobby or travel fund that makes life worth living.
- The Fluff: Subscriptions you don’t watch, premium tiers you don’t need, and impulse buys.
The Goal: Slaughter the “Fluff” so you can keep the “High Joy” while lowering your FI Number.
4. The “Early Retirement” Insurance Factor
There is one cost that usually goes up when you leave the corporate grind: Healthcare. Until you hit Medicare age, you are the one responsible for your premiums. In your Core Spending calculation, we must account for this. We’ll dive deeper into this in later lessons, but for now, add a “Healthcare Buffer” to your monthly estimate.
Your Homework: The Target Revision
- Calculate your “Lean” monthly spend: This is your Non-Negotiables + High Joy.
- Multiply by 12, then by 25.
- The Reveal: How much did your FIRE target just drop?
The Lesson: Every dollar you stop wasting is $25-30 you don’t have to save. You aren’t “restricting” your life; you are buying your time back at a discount.
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He didn't just save his way to freedom; he built a compounding engine. By combining "Bogleheads" index investing with a conservative options strategy, Earl turned a late start into a total victory. He’s not just talking theory—he’s living the math. Last year alone, Earl generated $78k in options premiums via the "Wheel" strategy and ~$400/month in passive dividends, proving that liquidity is the true key to quitting early.
Launched in 2019, EarlyRetirementEarl.com is a no-BS zone for dads and late-starters who want actionable, battle-tested steps to freedom. Featured on ThinkSaveRetire and Camp Fire Finance, Earl’s mission is to share the financial literacy he was never taught in school. No fluff, no gurus—just the math.
Not financial advice. I’m not a CFP or licensed advisor. All numbers are historical; markets fluctuate. Past performance is not indicative of future results. Do your own research and consult a professional.
