How the money gets you free

The arithmetic

Start here, because this one number decides more than everything else on the page put together. The share of your pay you keep, rather than the returns you earn, is what sets the date you go free.

Take home a paycheck and live on half of it. The other half is a year you will not have to work, set aside whole. You set aside another for every year you keep working. Leave that money alone. Let ordinary growth work it the way weather works a field, slow and without your hand. In about seventeen years, what you have saved throws off enough to cover your life without your labor.

That crossover is a real number you can write down today. It is roughly twenty-five times what you spend in a year. Reach it and your savings carry your spending on their own, for good.

The more of your pay you keep, the sooner you arrive. Keep only a third of it and the wait runs past two decades. Push it to sixty percent and it drops under fifteen years. Income helps, but the rate helps more, because the rate sets both how fast the money piles up and how little you will ever need it to be.

Seventeen years is only the arithmetic of a fifty percent rate at ordinary returns. It is the name of the site, not a promise. It moves as your rate moves.

The Engine

You are always in the market and always buying. What the Engine changes is how your money splits between stocks and the reserve. It also sets how large the stock position is. It reads two things off the market and nothing else.

The first decides whether you are in stocks this month or in the reserve. We take the S&P 500's closing price and compare it to its average over the last eighty-nine trading days. That slow line smooths the daily noise into something closer to a season. When the price sits above the line, you hold stocks. Drop below it and you move to the reserve. A single bad day does not move you. The price has to close on the new side of the line two days running before anything changes.

The second thing it reads is how rough the market is and it sets how much you hold in stocks. In calm markets you hold a full position. Let the market turn turbulent and the Engine cuts it back, further the rougher it gets. You hold less because the market is shaking. It is not a call on where prices go next.

The Engine is mechanical. That is the point of it. The rules are written down while nothing is happening, so the hard decision is already made on the morning the headlines turn frightening and you are most tempted to make it badly. You read the number once a week, on the first trading day, then follow it. You are never reacting to a market that moved an hour ago, or trading on your own nerves.

What you hold

Three holdings. Two of them carry names so you remember what they are for.

The first is stocks, one broad fund that owns the whole market. This is where the money grows. It sits here through the long stretches when the trend holds. We use SPY.

The Anchor is intermediate-term government bonds. It is the steadier place the money moves to when the trend breaks and high rates are paying you well to hold bonds. You hear the word and picture a weight that keeps you steady, which is the whole idea. We use IEF.

Dry Powder is plain cash, held in short government bills and kept ready. When bonds are not worth owning, the reserve waits here and goes back to work the day the weather turns. We use BIL.

Those three funds are our examples, no more. The method is not a list of tickers. It is broad stocks, high-quality government bonds, and cash, held in sensible proportions for good, evidence-based reasons. Any cheap broad-market equity fund does the first job. Any solid intermediate government-bond fund does the second. Any short-bill or money-market fund does the third. Own the right kinds of things. Which funds you use is your call.

Where the reserve goes

When you step out of stocks, the reserve goes one of two places. It moves to the Anchor only when bonds are paying well after inflation while inflation itself stays calm. The rest of the time it waits in Dry Powder as cash.

One thing pulls stocks and bonds down together: high inflation. So inflation holds a veto. When it runs hot, the reserve stays in cash, whatever the bonds are paying. That veto only ever keeps you out of bonds. It is never a reason to buy them. It predicts nothing. In 2022, when stocks and long bonds fell hard at the same time, this is the rule that held the reserve in cash while both of them dropped.

Valuation

One more number sits on the reading, the Owner's Yield. It measures how expensive the market is against its own long history. That is all it does. It moves none of your money. A high reading means the market is expensive. Expensive markets tend to fall further when they turn, so it is worth knowing. It is a warning light and nothing more. You never act on it. Neither do we.

What this does and what it will not

In a long bull market that only climbs, this loses to a portfolio that bought everything and sat still. It has to. Trimming the position when the market turns rough means you own less stock going into the good runs, so you give up some of the top. You will feel that. At some point a friend who did nothing will be ahead of you. You will sit with that for a while. We say so plainly, because a method that hides its weak years is the kind to walk away from.

If you can hold every dollar of stock through a crash that halves it and keep buying the whole way down, you may not need the Engine. Buy a broad index, hold it for thirty years, and ignore us. That is the honest truth. Almost nobody can do it.

What you buy with the trade shows up on the other side. The crash that takes a third or more off the people who held everything takes far less off you. You are still in the market, still buying, on the day it turns.

This is one reading, the same for everyone who opens it. It is never advice shaped to your particular life. What you do with it is yours.

Beat what you would otherwise get

Forget beating the index. That was never the contest. The contest is against the investor you would otherwise be, the one who piles in after a good run, sells somewhere in the fear, and comes back only once it feels safe, which is to say once the discount is gone. That investor is not a caricature. It is the average of almost everyone. The typical one earns more than a point a year less than the very funds they hold. It is worse than that number sounds, because the loss is taken in a lump, at the bottom, and never earned back. This method is built to beat that investor, the one you turn into when the screen is red. Measured against that, it wins. It is not close.

And insist on an honest measure. Anyone can look like a genius from the pit of a crash to the peak of a boom, fully invested, riding the whole way up. That is not a record. It is a starting line drawn after the fact. The only number that means anything runs a full cycle, from one market bottom to the next, through the fall and the recovery both. Measured that way, the question is no longer who stood highest at the top. It is who came through the whole round with the most still in hand, having carried the least risk and lost the least sleep to get there. That is where we are content to be judged.

Here is the part that matters most. It is also the quietest. The rules are set while you are calm, so when the story in your head gets loud, you have something steadier to hold onto than the story. The edge was never a better guess about what comes next. It is that you walk out the far side of the bad years with your savings mostly whole and your hands steady enough to keep buying.