Are you on schedule to achieve your goals? A key component of motivation is tracking and evaluating your progress for consistent feedback on your behavior. We tend to get lost in our day to day, feeling like we’re not getting anywhere, so it is essential to look back over a few months or years to reinforce how far we’ve come.
I’m always searching for new tools to track my progress, so I was excited to come across a new financial independence / early retirement (FIRE) metric called The FIRE Prowess Gauge from JW at The Green Swan.
Here’s how it works.
FIRE Prowess = Change in Net Worth / Gross Income
Simple, eh? (I couldn’t help myself, I’m Canadian.) Let’s get right into some numbers. For comparison, I’ve added my savings rates as well.
|Net Worth +/-||Gross Income||FIRE Prowess||Savings Rate|
What does this all mean?
If over the last 5 years your FIRE Prowess is:
- Negative or 0.0x – Not even on the path toward retirement, let alone FIRE. If you aren’t saving and investing any money and your net worth isn’t growing then it is time to make some changes and develop positive financial habits. It may be a change to a frugal lifestyle or getting an advance degree to take the next step in your career.
- 0.0x to 0.25x – You’re conscious of your retirement and know you should plan for it, but early retirement may not be on your radar at this point.
- .25x to 0.50x – You’ve got the ball rolling and you’re certainly trying! Keep investing wisely, perhaps add a side-hustle or few lifestyle tweaks to lower expenses and FIRE can be within your grasp.
- .50x to 0.75x – You’re working hard toward your retirement goals! Early retirement is definitely possible. Keep working hard and that investment snowball will be rolling (compounding) in no time!
- .75x to 1.0x – FIRE is on your mind and you are performing in overdrive right now!
- 1.0x and over – You are killing it! Don’t make any stupid mistakes and FIRE will be within your grasp in no time. In this scenario, your net worth is more than your lifetime earnings.
Unfortunately I only have net worth data from 2016 forward (prior to that I was definitely in the negative!). Based on the data I do have, I went from ‘certainly trying, FIRE can be within your grasp with some changes’ to ‘early retirement is definitely possible’ in about half a year! I’ve been really focusing on paying back my student loans, and my retirement account is steadily growing on the side.
I’d give myself a solid B- in 2016 and maybe a B+ in 2017 (so far).
The next goal is to get to the ‘overdrive’ level at 0.75! Considering I met the ‘certainly trying’ level when I was still a spendypants consumer by FIRE standards, ‘overdrive’ should be in my grasp soon. I’m very early on my financial independence journey, with six figures of student loan debt to pay, but so far the FIRE Prowess Gauge seems accurate. When I’m debt free and the magic of compound interest is working for me instead of against me, I expect my number to keep rising!
Also, as you can see, even a 38% savings rate (WELL above the average household savings rate in Canada – 5.8% in January 2017) is not enough to secure early retirement. If you’re serious about pursuing financial independence earlier than the norm, metrics like the FIRE Prowess Gauge can be a great tool to track your progress and keep you motivated.
If you want to read more about this metric, check out the post that started it all The Swan’s FIRE Prowess Gauge and Retirement Manifesto’s post that started the chain. The Rockstar Finance Forum is also tracking the chain.
Here are some of the other posts about the FIRE Prowess Score. How does yours measure up?
The FIRE Prowess Score Chain:
The Green Swan – The Swan’s FIRE Prowess Gauge 2016: 132% Lifetime: 93%
The Retirement Manifesto – Is Your Wealth Building On Track? 2016: 57% Lifetime: 44%
OthalaFehu – My Swan FIRE Prowess Numbers 2016: 72% Lifetime: 61%
Budget On A Stick – My FIRE Prowess Score 2016: 52% Lifetime: 55%
Shnugi – Calculating My Savings Rate 2016: 71% Lifetime 54%
Dads Dollars Debt – DDD’s FIRE Prowess 2016: 26% Lifetime 32%
Adventure Rich – The Adventure Rich FIRE Prowess Score 2016: 45% Lifetime 47%
Freedom Is Groovy – The Groovies FIRE Prowess Score 2016: 163% Lifetime 90%
Working Optional – Calculate Your Progress To Financial Freedom 2016: 97% Lifetime 75%
Budgets Are Sexy – My Total Lifetime Wealth Ratio:1 2016: 135% Lifetime 60%
Life Zemplified – FIRE Prowess Score for Life Zemplified2 2016: 78% Lifetime 76%
Physician’s Wealth Services – Physician Wealth’s FIRE Prowess1 2016: 43% Lifetime 46%
Married And Harried – Married And Harried FIRE Prowess Score1 2016: 32% Lifetime 14%
Ms. Liz Money Matters – Introducing the FIRE Prowess Score1 2016 279% Lifetime 72%
Actuary On Fire: The Swan’s FIRE Prowess Gauge – My Results1 2016: 61% Lifetime: 59%
Trail to FI: FIRE Prowess Score, Trail to FI Edition 2016: 34% Lifetime: 53%
Maximum Cents: Maximum Cents’ FIRE Prowess Score 2016: 94% Lifetime: 70%
Retiring On My Terms: ROMT’s FIRE Prowess2 2016: 119% Lifetime: 57%
Minafi: The Minafi FIRE Prowess Score 2016: 74% Lifetime: 94%
Military Dollar: FIRE Prowess Scores and How to Correct for Military Paychecks 2016 81% Lifetime 83%
Finance Yo Self: FIRE Prowess Score for Finance Yo Self 2016: 44% Lifetime: 44%
The 7 Circles: FIRE Prowess Gauge 2016: 246% Lifetime: 219%
Money Metagame: The Good, Bad & Ugly of the FIRE Prowess Gauge 2016: 108% Lifetime 68%