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When my good friend Fritz over at The Retirement Manifesto calls for a chain gang, I don’t ask questions. I do whatever I have to do get in on the chain.
In this chain gang challenge, Fritz drew inspiration from JW over at The Green Swan. JW devised a handy tool to gauge your progress toward financial independence. He calls his tool the FIRE Prowess Score and it’s calculated as follows:
Change in Net Worth ÷ Gross Income = FIRE Prowess Score
To show how it works, consider this example. In 2016, your net worth increased by $40,000. Your income for 2016 was $100,000. Your FPS for 2016 was thus 40% ($40K ÷ $100K).
Once you know your FPS, you can then use JW’s ranking system to interpret your results.
FPS Ranking System
| Score | Interpretation |
|---|---|
| Negative or 0% | 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 advanced degree to take the next step in your career. |
| Between 0% and 25% | 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. |
| Between 26% and 50% | You’ve got the ball rolling and you’re certainly trying! Keep investing wisely, perhaps add a side-hustle or a few lifestyle tweaks to lower expenses and FIRE can be within your grasp. |
| Between 51% and 75% | 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! |
| Between 76% and 100% | FIRE is on your mind and you are performing in overdrive right now! |
| Greater than 100% | 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 which Joe at Retire By 40 recently wrote about. This is certainly a tough milestone to reach, but maybe one day I can make this claim! |
The Groovies’ FPS
In 2016, our net worth increased by $180,601.96. Our household income for 2016 was $110,590.04. Divide our net worth delta by our household income and you get an FPS for 2016 of 163%.
| Change in Net Worth | Household Income | Change in Net Worth/Household Income |
|---|---|---|
| $180,601.96 | $110,590.04 | 163% |
Our FPS for 2016 was off the charts. And to show you how much of an anomaly it was, here’s our FPS for 2015.
| Change in Net Worth | Household Income | Change in Net Worth/Household Income |
|---|---|---|
| $14,497.29 | $122,536.03 | 12% |
To control for outliers, JW suggests having net worth delta and household income numbers for a span of at least five years. Here then is a rough estimate¹ of our FPS from the beginning of 2006 to the end of 2016, a total of eleven years.
| Change in Net Worth | Household Income | Change in Net Worth/Household Income |
|---|---|---|
| $1,054,424.00 | $1,172,832.93 | 90% |
Final Thoughts
Prior to 2006, Mrs. Groovy and I were struggling financially. But in May of 2006, we caught a massive break. We sold our one-bedroom New York condo at the height of an epic real estate boom and walked away with over a quarter of a million dollars. We then took that windfall and moved to low-cost North Carolina. In one fell swoop we wiped out all our consumer debt and purchased a home outright. It was a great way to start our encore careers.
Mrs. Groovy and I are under no illusions. We know that our path to financial independence isn’t easy to replicate. Turning a $7K down payment in 1998 on a dinky condo into a $250K tax-free profit in 2006 had nothing to do with skill. It was all unmitigated luck. But we are proud of how we handled our good fortune. In short order, we learned how to control our appetites for stuff, save mucho, and invest wisely. And JW’s FIRE Prowess Score proves it.
So kudos to JW. The FIRE Prowess Score is a great tool for gauging your financial progress. And kudos to Fritz for starting another chain. May this chain grow long and strong.
Addendum
Hey, guys, I just calculated our lifetime FIRE Prowess Score. It turns out our pre-FIRE-minded life FPS wasn’t as bad as I thought it was going to be. I think this is largely because Mrs. Groovy and I both had some pretty lean income years prior to our early 30s. Anyway, here are the results.
2006 to 2016 (our FIRE-minded life): 90%
1959 to 2005 (our pre-FIRE-minded life): 31%
Lifetime: 62%
¹ I wasn’t keeping accurate net worth calculations way back in 2006. The starting net worth I used to calculate our FPS over the past eleven years is surely off. But it’s not off by much. It’s definitely within plus or minus $25K. The ending net worth and household income numbers are very accurate, however.
FIRE Prowess Score Chain as of 7:31 AM EST on 8/21/2017
Anchor: The Green Swan – The Swan’s FIRE Prowess Gauge 2016: 132% Lifetime: 93%
Link 1: The Retirement Manifesto – Is Your Wealth Building On Track? 2016: 57% Lifetime: 44%
Link 2: OthalaFehu – My Swan FIRE Prowess Numbers 2016: 72% Lifetime: 61%
Link 3: Budget On A Stick – My FIRE Prowess Score 2016: 52% Lifetime: 55%
Link 4: Shnugi – Calculating My Savings Rate 2016: 71% Lifetime 54%
Link 5: Dads Dollars Debt – DDD’s FIRE Prowess 2016: 26% Lifetime 32%
Link 6: Debts To Riches – My FIRE Prowess Report Card 2016: 29% Lifetime 43%
Link 7: Adventure Rich – The Adventure Rich FIRE Prowess Score 2016: 45% Lifetime 47%
Link 8: Freedom Is Groovy – The Groovies FIRE Prowess Score 2016: 163% Lifetime 62%
Link 9: Working Optional – Calculate Your Progress To Financial Freedom 2016: 97% Lifetime 75%
Link 10: Budgets Are Sexy – My Total Lifetime Wealth Ratio: 2016: 135% Lifetime 60%
Link 11: Life Zemplified – FIRE Prowess Score for Life Zemplified 2016: 78% Lifetime 76%
Link 12: Physician’s Wealth Services – Physician Wealth’s FIRE Prowess 2016: 43% Lifetime 46%
Link 13: Married And Harried – Married And Harried FIRE Prowess Score 2016: 32% Lifetime 14%
Link 14: Ms. Liz Money Matters – Introducing the FIRE Prowess Score 2016 279% Lifetime 72%
Link 15: Actuary On Fire: The Swan’s FIRE Prowess Gauge 2016 61% Lifetime 59%
Link 16: Trail To FI: FIRE Prowess Score, Trail to FI Edition 2016 34% Lifetime 53%
Link 17: Maximum Cents: Maximum Cents’ FIRE Prowess Score 2016: 94% Lifetime: 70%
Link 18: Retiring On My Terms: ROMT’s FIRE Prowess 2016: 119% Lifetime: 57%
Link 19: Minafi: The Minafi FIRE Prowess Score 2016: 74% Lifetime: 94%
Link 20: Military Dollar: FIRE Prowess Scores and How to Correct for Military Paychecks 2016 81% Lifetime 83%
Link 21: Finance Yo Self: FIRE Prowess Score for Finance Yo Self 2016: 44% Lifetime: 44%
Link 22: The 7 Circles: FIRE Prowess Gauge 2016: 246% Lifetime: 219%
Link 23: Money Metagame: The Good, Bad & Ugly of the New FIRE Prowess Gauge 2016: 108% Lifetime 68%
Link 24: Summit Of Coin: Savings Rate or FIRE Prowess Score? 2016: 36% Lifetime 46%
I’m late to the party but I just did the figures.
I’m over 100.
Holy shit!!!!
A lifetime score of 62pct is awsome.
Last year we were around 60pct.
I sadly miss the records (and energy) to try to do a lifetime one. I plan to do it at the end of 2017.
Hey AT. Lifetime is hard. I went by our Social Security records for the years I didn’t have tax returns. Our 62% is definitely a little high. In college and my early 20s I had a number of jobs of the books. But I doubt that hidden income amounted to $30k. Hope all is well across the pond. Thanks for stopping by, my friend.
You guys ROCK. But I already knew that. 🙂
Aw, Laurie, you’re too kind. Thank you for your kind words. Made my weekend.
My wife and I are taking the approach of the janitor who recently passed and was a multi-millionaire and nobody knew it.
We aren’t in a position right now to retire early, but, will be able to improve our net worth significantly when we get the albatross of a monthly mortgage off our neck.
Hey Josh. Life is definitely easier and better when you don’t have a monthly mortgage nut. And I love the millionaire janitor approach to riches–slow and steady and under the radar.
Wow that’s some volatility in your FIRE score! But awesomely high last year – killing it!
I also liked your humility at your good fortune on the real estate. Too often people try to pass off dumb luck as skill.
Cheers!
Haha! 2015 was rough. Stock market was weak and our individual lithium stock had a rough year. I’ll have to check my numbers, but I think it was down around $25k. 2016 was just the opposite. Stock market was strong and our lithium stock was up around $50k. The market taketh and giveth.
Very cool, almost makes me wish I was not already early retired so I could play. Or maybe not, no way I’d make the list with the heavy hitters that are already on there! It is obvious this new metric is catching FIRE…did you see what I did there.
Haha! Very nice, Steveark. You got a delightful sense of humor. You could still calculate your FPS up to retirement. I’m sure your score will be pretty impressive as well. Thanks for stopping by, my friend. Always a pleasure hearing from you.
Nice score! I’m inspired by all the scores edging close to 1.0!
Thanks Mrs. AR. There are some very impressive FIRE enthusiasts out there. I got you beat for 2016. But when it comes to lifetime, I have a feeling you’re going to blow me away. I’m working on my lifetime score now. The score Fritz has for my lifetime is really for the years 2006 to 2016. Those are the years that symbolize my metamorphosis into a FIRE-minded person. Prior to 2006, I was a financial moron.
Thanks for the mention!
I like this score, but it is so dependent on investment performance. We’ve been doing very well over the last few years, but the numbers will be ugly when we get a downturn.
Congrats on a great 2016. That’s huge gains.
Agreed. I imagine things will get very ugly sometime during the next couple of years. I don’t see how we avoid at least a 20% correction. Mrs. G and I have decided to play it very cautiously. We down to a 35/65 allocation between stocks and bonds/cash. We’ll probably be down to a 30/70 split by the end of the year. But despite being so wimpish when it comes to stocks, our portfolio is up close to $80K so far this year. And that’s largely due to the one individual stock we own, a lithium company that’s developing brine operation in Argentina. Definitely not a stock for the faint of heart. If it ever produces battery grade lithium, I’ll look like a genius. Thanks for stopping by, Joe. I really appreciate your sage admonition.
163%!!! Wow, congrats on reporting the highest score to date in “The Chain”! (and, thanks for jumping on The Chain Gang! Without even asking any questions! Wow, that’s trust!).
Your official in as Link #8!
Fascinating to watch the scores roll in as others join. Congrats on a great example of how the FPS score really does work, even if your path is unique (Geo-Arbitrage, anyone!).
Haha! Yes, 2016 was freakishly good for us. I’ll have to do an addendum to our lifetime score, however. For our FIRE-minded life, 2006 to 2016, our FPS is very commendable. Our pre-FIRE-minded score, 1960 to 2005, is not so hot. I didn’t work out the numbers last night because I got tired (I so lame, sometimes). But I have that score tomorrow. Thanks for another great chain, my friend. And I hope you have a great time with your friend tonight. Cheers.
So far this year Team Waffles is killing it! Unfortunately, we have some years to make up for (oh the times before we were FIRE minded). Thanks for sharing Groovies!
Way to go, Team Waffles! We had some very lean years before we became FIRE minded as well. Are you going to join the chain? I’d love to read about your score and journey.
Nice work Groovies!! It always helps having a little good fortune as the wind in your sails. I too have had some good fortune fall my way and we can’t take that for granted. But you folks certainly haven’t squandered it, you built a great life and had an impressive 11 year FIRE journey you should be very proud of.
Thanks for sharing your FIRE Prowess and joining the chain gang!! Looking forward to meeting up Friday 🙂
Thanks, JW. Your kind words really mean a lot–especially since Mrs. G and I hold both you and Lucy in very high esteem. Looking forward to Friday as wel. I’ll shoot you an email tomorrow to firm up time and place. Thanks for stopping by, my friend. And thank you for devising the FIRE Prowess Score. It’s a great arrow in anyone’s personal finance quiver. Bravo.
Nice work Groovies. You are officially on the chain. You guys did quite well this past year and a very commendable lifetime score. I have played the slow and steady score, but figure I can turn up the savings if early retirement ends up on the near horizon.
Thanks, DDD. We got very lucky. Started learning about personal finance just before we had our real estate windfall. The financial gods were smiling upon us. Nothing wrong with slow and steady. That’s really the best way to go–especially if you’re young. You don’t have to rely on luck.