How much money do you need to achieve financial freedom?
There are many paths to achieve financial freedom from investing, to blogging or even being a trust fund baby.
But what is financial freedom, exactly?
Is it not having to work?
Financial freedom is freedom of choice.
Freedom from money worries, freedom from having to work, freedom to pick and choose where you live and what you do. It’s the freedom to know that you don’t have to be a corporate slave and you can choose how your life looks.
A million dollars in the bank? Two million? More?
Financial security will be different for each person.
If you don’t know how much money you need to be financially free, how will you know when you get there?
You have to be precise in your goals if you want to achieve them.
Today I want to share with you a way to determine what financial freedom really is, for you.
This exercise will show you exactly how much you need to achieve true financial freedom and the freedom to do whatever you want.
The freedom to never have to work, the freedom to travel, start a new business, or anything else your heart desires.
Goals act as a guiding light. When you set your goals you create an intention of what you want to achieve. Without getting clear on your goals and writing them down there is little chance of success as you continually change the goal and thus your actions.
It’s no secret that a solid investment plan and a lifestyle business are the way to create your freedom.
Quitting your 9 to 5 and living the high life may seem like a financial impossibility, but have you taken a minute to workshop how much you actually need to be able to quit your job?
There are a few different levels of financial freedom that you may not have considered. Each of which is completely and absolutely possible.
Here are the 3 steps for planning your way to financial freedom
- Know what you need to be financially protected.
This is the first figure that you need to know. How much money do you need, on a monthly basis, to be able to survive.
Not on a luxury budget, but on a boot strap budget.
To discover how much income you need to be financially protected, add up all your necessary expenses.
If you cut everything out of your life and were simply surviving, with no holidays, no restaurants etc.
How little money could you survive on? This is a really important figure to know as you can instantly see how much you could be saving if you prioritise mindful spending and saving. We’re talking being completely frugal, making your own washing liquid and getting by.
Write that number down: $___________________
This figure is the amount you need to be financially protected — meaning that if you had no wage-based income, this is the amount you would need to hustle your butt off to produce in order to still have a roof over your head and food to eat.
This is the level of income that fizzle.co refer to as “Ramen rich”, and it certainly appears to be the lifestyle of many who make their livings online or while being digital nomads. There is nothing wrong with that, but it is a spartan lifestyle.
2. How much money do YOU need to achieve Financial Independence
How much money you need to be independent of work and be able to live in the lifestyle that you are comfortable with.
To discover your level of income required for financial independence, look to your current annual income and divide by 12.
This is the amount that you need, on a monthly basis, to be financial independent.
With this figure, go to the table above and you can see how much you would need invested, at a 5 or 8% rate of return, to have financial independence
3. Decide on your level of Financial Freedom
Ah, financial freedom. The point where finance starts to become truly exciting.
Financial freedom is the stage where your investments and passive income sources provide enough income for your dream life.
Write down all the things you are saving for or would like to upgrade.
For example, if you would like a new car, write down the make and model and the monthly repayments.
Write down the things you want to have in your life and calculate the monthly income needed.
Fancy a yearly trip to Rome? Add the cost for that, too.
Now that you have all your mini financial goals, narrow it down to a monthly figure and use the table above to see how much you will need invested to create your financial freedom.
4. Total financial freedom:
Let your mind run completely free.
What are the things that you have always wanted but have been scared to put on your lists because they seemed too, too wild, or simply unachievable.
How about a private island in the great barrier reef?
Or a new helicopter to help you get there?
Let your mind run wild. Do you want to dress like a bond girl, drive a Bentley and carry a Balenciaga handbag? How about owning a yacht and cruising the Meditteranean?
Write down all of the things you want and come up with a total yearly figure — don’t be scared! Dream big here. This is your time. You now can see exactly how much income you need. Using the table above , find out how much money you need to have invested to be able to live the life of your wildest dreams.
Now that you have a specific figure of how much you need to create your own financially independent future, don’t let this number scare you! Use it as motivation to create your own business, side hustle or brilliant investment portfolio.
What did you come up with? Was it higher or lower than you expected? Did this number scare you?
If you’d like some more guidance on creating your financial goals I’ve created a completely free financial goals worksheet which you can download here
P.S. WANT A FINANCIAL FREEDOM WORKSHEET THAT WILL HELP YOU NAIL YOUR FINANCIAL GOALS?
I’ve created a free worksheet to help you plan your financial goals. It’s a downloadable worksheet, meaning you can fill it in right on your computer without needing to print. To get the worksheet, sign up for the VIP list here. Signing up will also give you access to a free library of excellent worksheets, helpful e-books, and useful resources.
Originally published at curiousandclever.com on December 4, 2015.