Last weekend, the Bitcoin2024 conference came to an end. This conference brought the strongest voice in the Bitcoin world to the participants and even the whole world: national strategic reserves. [ “7.28 Teaching Chain Internal Reference: US Senators to propose a bill to promote the US Treasury to purchase 1 million BTC in 5 years” ], once the trend is formed, it will inevitably follow the trajectory of history. BTC has been flying up and down, yesterday it fell to 66.6k, and today it soared again, breaking through 69k and reaching 70,000 dollars.
In light of this, the rate of return of the [ “Ten-year Agreement” real-time witness plan ] has also doubled from more than 30% at the time of adding positions on July 6 to over 60% now. It has only been a year since the plan was launched on June 6 last year.
Jiaolian said that the expected CAGR is 40%, and the accumulation period is half of that, 20%. Now, in the first year, we have achieved 60%, which is a good start. This also reflects a fact from the side, that is, since 2023, the market has entered a bull market, but it is not the violent bull market that everyone knows and everyone is flocking to, but the climbing period before the bull market.
The "Ten-Year Agreement" plan has been implemented for more than a year, and the report has been written for more than a year (click on the homepage of Liu Jiaolian's official account and search for "Ten-Year Agreement" to find dozens of real-time summaries of the implementation of the plan in the past year), but many readers still don't quite understand the ideas and principles behind it. Today, I will take some time to talk about the financial wisdom behind the "Ten-Year Agreement", commonly known as financial intelligence.
First of all, please think about a question: What is the purpose of investment and financial management? Some people would say it is to get rich quickly. Wrong. If a person's goal is just the amount of money, then he is likely to have a bad life.
We should think a little more. Why do we need money? Is it to provide food and clothing for our family? Is it to allow ourselves to enjoy more leisure time? Is it to allow ourselves to travel as we please? Or is it so that we can do the things we love that we have always wanted to do but have no time to do because we are too busy at work?
If we don’t know what happiness is and how to be happy, then even if we are given more money, we will not be happy. We may even make ourselves unhappy because of money, which in turn destroys our sense of happiness.
Only when you knock on the door deep in your heart and figure out what your happiness is, will you stop rushing against the flow on the road to happiness just to earn a few more dollars.
Working hard for money, making compromises, engaging in intrigue, being callous, and shortening one's life span is like being a slave to money and being alienated by capital. As human beings, we should let money serve us and become a tool and helper in achieving our goals of happiness in life.
We become adults twice in our lives. The first time we become adults is when we turn 18. The second time we become adults is when we become financially independent.
There are many definitions of financial freedom:
Wealth magazines directly throw out tables full of unattainable numerical thresholds, telling you how many houses, cars, and deposits you need in first-tier, second-tier, and third-tier cities to be called "financially free." Be wary of this brainwashing that snatches the right to define. When you accept the money numbers set by the mouthpiece of capital as your goal, you are fooled again, falling into the trap of fighting for money and working hard for money, and continue to be a slave to money and capital.
The second definition is from an accounting perspective . Financial freedom is defined as the passive income provided to cover your daily expenses. For example, the rent provided by your house, the dividends provided by your stocks, and the annual growth of your BTC are enough for you and your family to eat, wear and use. This is the state of financial freedom.
Another way of looking at it is from the perspective of production relations. When you can "retire" early from an employed job and can maintain your current lifestyle without having to work for a salary, then you have achieved financial freedom.
Overseas netizens call the last one "FIRE" - Financial Independence Retire Early.
Financial freedom is not difficult. With hard work, everyone can achieve their own FIRE plan. In simple terms, there are three steps:
1. Choose the target of savings
2. Continue to accumulate savings
3. Retire early when you have enough savings
OK, now we need a quantitative calculation. It just requires a little bit of math.
Since it is something that ordinary people can do, the capital invested in accumulating savings must come from the income from working in the early years. Assuming that the monthly income is 1, x% can be used for savings, and (1-x)% is used to maintain basic daily expenses. Here x% is called the savings rate.
Again, assuming that the CAGR (compound annual growth rate) of the underlying asset of the savings is c, then using the geometric progression summation formula It can be easily calculated that after n years, the total savings will accumulate to x(1-(1+c)^n)/(1-(1+c)).
Suppose that after n years, z% of the savings are withdrawn each year as passive income. The ratio of this passive income to the original working income is called the income replacement rate, recorded as y%.
Simple calculation shows that n = log(cy/(zx) + 1) / log(1+c).
Substitute the values and make a table as follows:
In the picture, the diagonal grid highlighted in yellow by the teaching chain is the number of years required for passive income to cover the original (1-x)% daily expenses. The teaching chain calls passive income covering expenses " relative financial freedom ."
The green highlighted ones are the number of years that the passive income can completely replace the savings required for the previous working income. At this time, the passive income will not only provide a living guarantee, but also a surplus to improve life or expand savings. Jiaolian calls this kind of passive income that 100% replaces the original income " absolute financial freedom ."
Let's take a concrete example:
You are an ordinary worker with a monthly salary of 3,000 yuan. But from the first day you entered the factory, you were determined to achieve financial freedom as soon as possible through your own efforts. So you lived frugally and saved a small half of your salary every month - about 1,000 yuan - and saved it in BTC...
Ten and a half years later, if you are willing, you can withdraw 4% from your BTC position every year to cover your daily expenses of 2,000 yuan per month. At this time, you have reached a stage of relative financial freedom. But you did not stop, but continued to work hard to save BTC...
After another two years, your BTC position will be able to replace your monthly salary of 3,000 yuan by withdrawing 4% every year. At this point, you have reached the stage of absolute financial freedom. You can choose FIRE to retire early and enjoy life.
In the example above, there is a hidden parameter assumption that BTC’s CAGR is 30%.
We obtained these numbers by looking at the savings rate x = 35% column in the table.
This is also the logical origin of the parameters used in the Ten-Year Agreement: a worker with a monthly salary of 3,000 yuan saves 1,000 yuan every month, and together they achieve relative financial freedom within the ten-year agreement.
The smart readers have already figured out that the absolute numbers here are not important. There are always stupid people who ask why only 1,000 is invested every month. This time the explanation should be very clear. In the above mathematical formula and model table, there is only the savings rate x, but there is no specific investment amount.
If you invest 1,500 yuan for a monthly income of 3,000 yuan, 15,000 yuan for a monthly income of 30,000 yuan, or 150,000 yuan for a monthly income of 300,000 yuan, the savings rate is the same, and it corresponds to the same column in the table, that is, the column with savings rate x = 50%. Therefore, the time required to achieve relative financial freedom and absolute financial freedom is also the same.
If any readers still remember Jiaolian’s article "From Investment Novice to Financial Freedom" published on August 21, 2021 three years ago, they will remember that Jiaolian mentioned that for individuals, the savings rate should be 10%-50%, and for small businesses, the savings rate should be 5%-15%.
In the table above, Jiaolian highlights the number of years needed to achieve absolute financial freedom when the savings rate is 5% – 50% in dark green, ranging from 10.6 to 19.1 years; relative financial freedom only requires 8.2 to 18.9 years. The higher the savings rate, the faster you will achieve freedom.
Most people should be able to achieve a savings rate of 35% to 50% if they grit their teeth. In this case, for most ordinary people, if they save like this for two or two and a half cycles, they can basically be relatively free, and if they save for more than three cycles, they can be absolutely free.
Of course, if we are not confident about BTC CAGR 30%, we can lower our expectations. For example, the following table is a model for CAGR 20%:
At this point, it will take about 15 years to reach absolute financial freedom. Working at 20 means FIRE at 35. At 35, there is a wave of layoffs. Others lose their jobs and work as delivery drivers, but you can go home and lie down and do whatever you want, or do nothing if you don’t want to.
Or even lower, 10%: (However, if it is reduced to 10%, I think it can be achieved by carefully selecting stocks)
At this time, the time to achieve financial freedom is further extended to about 20 years. Even if you start working at 20, you have to wait until you are 40. If you fail to cross the 35-year-old threshold, the whole plan may be interrupted.
From this, everyone can understand how valuable a long-term stable job is for a long-term retirement plan from a financial perspective. This is probably one of the reasons why large companies that are good at supplying older young people to society cannot stop the tide of civil service exams despite their high salaries.
A job that requires you to look at the boss's face and can be laid off at any time is just a job. A job that does not require you to look at anyone's face and can be done for a lifetime as long as you want is a career worth fighting for all your life.
Back to the topic, if you want FIRE, financial freedom, and early retirement, how many BTC do you need to save?
Obviously, the exact number will vary from person to person.
I remember reading a report about Mr. Zong Qinghou before his death, saying that he lived a simple life, with an annual expenditure of only 100,000 yuan. According to this standard, you only need to save about 100,000/4% = 2.5 million yuan in BTC, which is equivalent to about 5 BTC at today's price of 69,000 dollars.
I remember a blogger who tried hard to practice the FIRE concept in the A-share market. His goal was to save 5 million yuan in financial assets before the age of 35. This is equivalent to about 10 BTC at the current price. A little calculation shows that the blogger's retirement expenses are about 5 million x 4% = 200,000 yuan per year.
Another overseas netizen said that he thought he could retire early if he saved 1 million USD in BTC. Let's do the math. 1 million USD in BTC is about 15 BTC today. Withdrawing 4% every year is 40,000 USD, which is enough to support the annual expenses of about 300,000 yuan. This is enough to live a life with a house and a car, and to travel whenever you want.
Everyone should have their own plan. What is more important than numbers is what kind of life you want to live.
