E-Fire model: a new model for financial independence

The fire movement suggests a very simple model to free oneself from the slavery of work. Multiply your annual expenses between 300 and 400 and you will have the amount that, if invested in low-cost etf will allow you to live a lifetime. In my case the annual expenses are 24k euros so I need a figure between 600k and 800k  euto to be financial independent. So, as shown in the following figure, you must first create your nest egg and then from this, withdraw the money you need.

There are two main criticisms of this model, the first which is a model for the rich. Indeed 600k-800k euros are a huge sum for me.

Secondly in this  model you could be a victim  of “Capital Depletion”. Not knowing the performance of the stock or bond markets you could remain without money. It is certainly not necessary to be a “wolf of wall street”  to understand that if you  you are so unlucky to start your journey at the wrong time you could remain without money.

There are many solutions that can make this model less rigid but I would like to introduce a new variable.

Today the Fintech world offers us important new opportunities such as p2p lending. In this model, the investment takes place both in low-cost etf but also in p2p platform that do not suffer from the fluctuating trend of the stock exchanges but have a constant return (around 10% at the time of writing).

In this way it is possible to balance the fluctuating trend of the stock exchanges by investing in the p2p platforms, withdrawing the capital from the ETFs when the stock exchanges are high and vice versa by investing in the stock exchanges when they are low withdrawing the capital from the p2p platforms.
In practice, a flow is generated as shown in the following figure.

I called this model e-fire model where it stands for European as this model will be described in the next posts only with tools easily available for a European citizen.
Stay tuned

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