I started with my total minimum expenses for 2012 which will come in right around $18k. I then added an extra $500 to give around a 3% cushion in minimum expenses covered. I then increased my minimum expenses by an assumed 3.50% inflation rate. After another year I'll have a better idea of what my expenses might look like due to inflation and potential decreases in my spending which I'm hoping to cut some more of in 2013. You'll find out my 2013 goals early next year.
To calculate my Dividend Goals, I used $1,770.65 since that is my forward 12-month dividends as of now and assumed a 5% average dividend growth rate plus a 0.5% increase due to automatic reinvestment of the dividends. I then assumed that I could add $50k in fresh capital each year carrying an average yield on cost of 3.00%. See the table below for the final results.
I think I"ll be able to reach FI earlier than my 12 year target but there's a lot that can change when you're projecting out 2 years let alone 12. I believe that all of my assumptions are erring on the side of caution to leave me with a much larger margin of safety. For example, my average dividend growth rate is higher than the 5% that I used in my calculations and the $50k in fresh capital doesn't include the fact that I'll be selling off some of my ESPP shares every 6 months starting in June, which should net me an extra $5-7k every six months that isn't accounted for. By selling off my ESPP shares, I'll be trading in a 1% non-DG stock for 2.5-4% DG stocks. That's a good tradeoff that will help out a lot towards my FI goals.
I'll update these goals as the year(s) go along in case I'm able to make more or less progress than I originally anticipated in these calculations. It's very good to see that using these conservative numbers I'll be able to reach FI before I turn 41.