Three Ways to Fund Your Life After FIRE
In the last post, I teed up the question:
How much can you actually spend each year once you’re no longer working for a paycheck?
There isn’t one clean answer to that.
But over the years, I’ve found there are really three practical ways people approach it. I’ve either used or experimented with all three at different points.
The first is what I’d call the cash flow approach.
This is the idea that you only spend what your portfolio produces—dividends, interest, distributions. You don’t sell anything. You just live on what shows up.
There’s something very appealing about that. Psychologically, it feels clean and stable. Almost like recreating a paycheck without touching the principal.
I leaned heavily into this approach for a while, and in many ways, I still like it and think it is “the” ideal way to go. It creates a natural boundary around spending.
It is the way the first edition of Your Money or Your Life recommended, and was built out further in Rich Dad Poor Dad.
But… it can also be limiting, depending on how your portfolio is structured. If you are primarily in paper assets, it can be tougher to achieve.
YouTuber Graham Stephan is a proponent of this approach. He is also an investor in rental real estate. Rental real estate can produce more significant cash flows (but also requires more up front capital, reinvestments, and had been compared to a full- or part-time job).
The second approach is the one many people have heard of—the 4% rule.
This is where you withdraw a set percentage of your portfolio each year, regardless of whether it comes from income or selling shares.
So if you’ve got a $1 million portfolio, you’re spending about $40,000 per year (adjusted over time for inflation).
Theoretically, many portfolios can withstand this amount of withdrawal over a 30-year period. Recently, the author of the study that championed this approach has revised the number up to 4.8%.
(FIRE may create a 40-60+ year need, though, so proceed with caution).
What I find most useful about this approach isn’t just the spending rule—it’s how it reframes decisions.
When you realize that every $1,000 of annual spending roughly “costs” $25,000 in invested capital… you start looking at expenses differently.
That $600 a year in subscriptions? That’s not just $600.
It’s $15,000 of capital required to support it. Whoa!
That lens alone has changed a lot of my decisions.
The third approach is a bit more flexible. It is a variation of the 4% rule. The fixed percentage approach.
Instead of a fixed dollar amount, you spend a percentage of whatever your portfolio is worth each year—say 5%.
So in a strong market year, you spend more. In a down year, you naturally pull back.
I like this because it adapts to reality. Markets go up and down, and this approach acknowledges that instead of fighting it.
It also gives you a built-in permission structure:
Big years → bigger life.
Lean years → simpler living.
It takes out the guesswork. You just adjust to reality.
None of these approaches are perfect.
But they each create a different experience of financial freedom.
And that’s really the point.
Because the “best” strategy isn’t just about not running out of money…
…it’s about how you want to live along the way.
Radical lifestyle design is the other—and more important—part of the equation.
So…
Which approach is most appealing to you?
If you stopped working for a paycheck today, what would your annual spending budget be based on your current net worth?
Tomorrow’s post will discuss the way I now utilize these approaches.