The Financial Flexibility Grid


A few months ago I released The Early Retirement Grid, which showed how many years it would take to reach financial independence based off various income and spending levels. The grid made the assumption that you needed 25 times your annual expenses to achieve financial independence (using the famous 4% rule). 

Today I want to introduce a similar grid using a different concept: Financial Flexibility.

I define Financial Flexibility as the halfway point to financial independence. So if you need 25 times your annual expenses to reach F.I. then you only need 12.5 times your annual expenses to reach financial flexibility (if you need $1 million to reach financial independence, you would need $500,000 to reach financial flexibility)

The term Financial Flexibility captures an interesting idea: you haven’t reached a position where you have enough money to never work again, but you have accumulated enough money to be flexible with your decision to work.

Example Using the Grid

Consider the following example: Bob and Susie have two children and earn a combined after-tax income of $70,000 per year. They typically spend around $40,000 per year. Using the Early Retirement Grid, they see that it will take about 21 years to reach financial independence at this income and spending level. Even though this puts them on track to retire far sooner than most of their peers, it still seems daunting. Using the Financial Flexibility Grid, they see that it will only take 12 years to be financially flexible.

So instead of having a portfolio worth $1 million providing them with $40,000 in dividend income, being financially flexible means they only have a portfolio worth $500,000 providing them with $20,000 in dividend income each year. But this is enough for them to be flexible with how they decide to work. They can meet their spending needs of $40,000 each year through ways other than traditional 9-5 jobs if they choose.

Perhaps one of them quits their job completely to pursue a lifelong business dream. Maybe they both quit their full time jobs to work part time. Or maybe they want to take a year off work entirely and travel with their kids. No matter what Bob and Susie decide to do, they have the flexibility to decide what they want work to look like. Since their portfolio is providing them with half of their necessary income, they have a huge amount of flexibility to decide how they come up with the other half. The best part of all is they can reach this point before they’re completely financially independent.

The Beauty of Financial Flexibility

This brings up an important point: You don’t need to be completely financially independent for your savings to have a dramatically positive impact on the way you live.

One of the biggest complaints people have about the whole “Financial Independence/Retire Early” idea is that most people don’t actually want to quit working completely at a young age. This is why Financial Flexibility is such an appealing idea: if you can just reach the halfway point to financial independence you gain a significant amount of flexibility to use your savings to create a work life catered to your unique interests.

Assumptions used to create the grid:

  • Investments grow at 5% annually
  • Beginning net worth is $0

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Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.

Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.

His favorite investment platform is M1 Finance, a site that allows him to build a custom portfolio of stocks for free, has no trading or maintenance fees, and even allows him to set up automated target-allocated investments.

His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.

His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.

His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.


Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

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