Today’s post is going to be about personal finance and offers an update on the AVI family’s journey toward financial independence (FI).

Back in March of 2021, the AVI family reached financial independence and officially declared themselves “Flamingo FI”. At that time, their net worth had surpassed their FI number. In that article, I also outlined the 4 stages of the FI life cycle, which were defined based on various measures of net worth:

1. 1. Net Worth (NW): Total Assets – Total Liabilities
   2. Accessible Net Worth (ANW): NW – Primary Residence Market Price
   3. Adjusted Accessible Net Worth (AANW): ANW- Retirement Assets

For most people, the equity in their primary residence is a significant component of their net worth. However, it is not easily accessible without taking out a HELOC loan. The ANW measure of net worth accounts for this by completely disregarding the market value of the primary residence, rather than just subtracting the equity. This approach more accurately reflects the liquidity of an individual’s assets

Retirement assets also play a significant role in determining net worth. For those over 59 years of age, these assets are a valuable source of liquid wealth. However, for those who are not yet in the retirement age bracket, accessing these assets before age 59 comes with a significant penalty. In this case, tracking the AANW metric becomes important to accurately assess the available liquidity of their assets.

Using these definitions of net worth, I defined the following 4 stages of FI

• • Accumulation Phase: NW < FI Number
  • Semi-Retirement Phase: NW >= FI Number And ANW < FI Number
  • FIRE Phase:  ANW>=FI Number And AANW < FI Number
  • Traditional Retirement Phase: AANW > FI Number

The “FI Number” is a crucial factor in determining the various stages of the financial independence lifestyle. It’s possible for an individual to revert back to the accumulation phase from retirement if they choose to raise their FI number significantly. Moving the target FI number or simply not being aware of it is, in my opinion, a primary source of stress and a motivating factor for folks to remain locked in the rat race of  “keeping up with the Joneses”

The AVI family carefully evaluated their lifestyle and established their FI number early on. Using this predefined FI number as an anchor, they have been steadfast in monitoring their progress toward a financially independent lifestyle ever since.

Today, I am thrilled to announce that the AVI family has entered the third stage of their financial independence journey! Here are the updated numbers to support this milestone:

• • Net Worth (as a percent of FI):  146.84
  • Accessible Net Worth (as a percent of FI): 101.34
  • Liquid Assets to Debt Ratio: 6.863
  • Cash Balance/one year living expense: 1.91

One of my new year goals was for AVI family ANW to cross the threshold of 100. In my wildest dream, I did not anticipate achieving this goal one month into the new year.

I am cautious of the current market rally and have begun transferring a substantial portion of my investments into cash equivalents, which has resulted in a substantial increase in the AVI family’s cash balance buffer. My primary focus for the new year is to maintain a margin of safety and ensure the ANW remains above 100.

It is a tremendous feeling to know that the AVI family is financially secure. This allows me to concentrate on my passions, such as being a dedicated student of the markets and the economy as a whole, and work towards building my skills as an astute active investor.