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# How to COAST to Financial Independence (EVEN IF YOU'RE BROKE)

## What is Coast FIRE and how can we use Coast Fi to reach financial freedom? Instead of focusing on the dollar amount, tracking share count is a more stable metric towards financial independence especially when using dividend reinvestment plans (DRIP). Using the S&P 500 ETF (VOO) as an example, I am trying to figure out the share count to cover basic expenses taking into account compound interest and dividend reinvestment.

Forget about a target dollar amount to reach financial independence — I use a **much better metric**.

Everyone’s portfolio is going to have massive swings up and down throughout our investing journey as the market booms and busts.

Focussing on my **portfolio value** **just sets me up for depression**.

I would overestimate my progress only to snap back to reality at the next market correction.

A much better metric of progress is to focus on **share count.**

Let me show you what I mean!

On the go? Watch my video **HERE**.

For quick context, financial independence is when **our investments generate enough profit to cover our basic expenses for life**. This can mean early retirement or pursuing a project I actually love.

With our basic expenses covered, the number of options exploded. Before financial independence, I can’t afford to be a full time Reddit moderator…

Back to the article.

Let’s use the S&P 500 as our benchmark, specifically **VOO — Vanguard’s S&P 500 ETF** which is currently **$461 per share**.

The first question is, how many shares do I need today to be financially independent right now?

4% Rule to Retirement

If I need **$50,000 per year** to cover my basic expenses, then my portfolio value today will need to be roughly **25 times** that amount.

This calculation is known as the **4% rule**. Basically, you withdraw 4% from your portfolio initially in the first year, and then all following years, you increase that amount by inflation.

$50,000 times 25, which is the same thing as dividing by 4%, is **$1.25 million**.

The 4% rule is hotly debated. Many say it’s too aggressive but that is a topic for another video. Let me know in the comments what you think.

This means I would need **2,711 shares** of VOO to be financially independent today. Unfortunately, that is not a reasonable goal for me.

Let’s say my goal was to achieve financial independence in 10 years.

How many shares would I need to have in the year 2034?

Let me give you a hint.

**WAY less than $2,711.**

Over the last 30 years, the S&P 500 has an average annualized return of just over **8%**.

S&P 500 Investment Return Calculator

If we adjust for inflation and keep all of our numbers in today’s dollars, then the average annualized return drops to **5.5%**.

That means, in 10 years, a single share of VOO adjusted for inflation will be worth about **$745**.

Long Term S&P 500 Investment Return Calculation by author

If I do the same math as before using a yearly spend of $50,000, then I will need **1,674 shares** in 2034 to reach financial independence.

Thats more than a 1,000 fewer shares.

Let’s look at a second example.

If my goal was a little bit more conservative, and I wanted to reach financial independence in 20 years, that’s the year 2044, then a single share of VOO would be worth about **$1,276**.

Long Term S&P 500 Investment Return Calculation by author

Once again, a yearly spend of $50,000 adjusted for inflation means that I only need **980 shares** of VOO to be financially independent in 20 years.

It gets even better when we expand on that.

If I was able to buy 980 shares today worth **$450,000**, then I would actually have way more than 980 shares in 20 years if I were to reinvest my dividends.

This is known as **DRIP (aka Dividend Re-Investment Plan)**.

What is a Dividend Investment Plan (DRIP Investing)

The average annualized return goes up to **7.5%** if dividends are reinvested and used to buy more shares.

S&P 500 Investment Return Calculator

After accounting for the DRIP, we would only need to **689 shares** today.

Long Term S&P 500 Investment Return Calculation by author

That would take **$317,000**, which is a huge improvement from **$1.25 million**. But still, that is a massive sum of money.

Let’s look at a more realistic scenario of dividend reinvestment.

In reality, I have savings to buy some shares, but not 689 shares.

For this example, let’s say I am 30 years old and I want financial independence by 50.

That’s technically **21 years** so my target will be **645 shares** of VOO.

Long Term S&P 500 Investment Return Calculation by author

Whether the market goes up or down in the meantime, I’m just stacking up the shares.

If I have $50,000 saved up between all my accounts (401k, Roth IRA, HSA, and brokerage), then I can buy **108 shares** right now.

Just 581 to go, right??

Not exactly.

Dividend Investment Calculator

By the time I hit 50 years old with dividends reinvested, that original **108 shares **will buy me **52 additional shares** for a **total of 160 shares**.

Every share I buy early on will generate more shares of VOO.

From here on out, if I commit to buying **20 shares every year with DRIP**, then I will have **645 shares** at **50 years old**.

And I only had to actually buy **508 shares with money out of my pocket** thanks to DRIP.

With this mentality, **market downturns are no longer a source of stress**, but an opportunity to buy more shares for less money.

Now I must admit, I have not been completely honest. VOO might be one of the most popular ETF’s out there, but it is **not my ETF of choice**.

A higher annualized return allows me to cut years off of my financial independence timeline. Check out this **video** where I go over **how to find the best ETFs that can outperform the S&P 500**.

Catch you on the flip side.

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