How Much Money Do You Need to Achieve Financial Freedom?

There are many ways to achieve financial freedom if you google for it there are tons and tons of articles to read, but before you click search.

Instead of finding the perfect passive income and ways to reach financial freedom, why not find your target number first? how much money do you need for your freedom?

Determining the target number will refine our search for investments and instill a sense of purpose and awareness to strive toward achieving that goal.

If you dont set it, you will not hit it

-Jim Rohn

Financial Independence (FI)

Financial independence is when you feel that you are not dependent on your parents or anyone anymore, you have a job and can stand on your own.

You can shoulder your expenses through your active income. You can pay your rent, and monthly bills, and buy clothes you like.

The downside of being financially independent is it requires more effort and time from your 9-5 jobs to support your needs.

Financial Freedom (FF)

You’ve reached financial freedom when you feel that you have much more time for your family, watch your children, do what you are passionate about, start a business, and travel with your loved ones, without thinking much about your monthly bills and needs.

Financial freedom is having enough income, savings, and investments to live the life you desire without relying on your 9-5 jobs.

Financial freedom requires minimal effort and time, because the income you generate is passive, unlike FI which is active coming from traditional jobs.

It is important to remember the relationship between income and expenses. The idea is to cover our expenses with our income. So, we can derive a formula bulleted below.

• Requires more effort and time
  • (Active) Income – Expense = Financial Independence

Our goal is financial freedom we can do that if we use the formula below, our job is to turn our active income into a passive income, so we can do what we want and retire early.

• Requires minimal effort and time
  • (Passive) Income – Expense = Financial Freedom

There are ways to make a passive income but before that let us compute first our nest egg or the money you must invest to achieve financial freedom

1. List Down Expenses

The first step is to think about your monthly expenses and list down your spending to give you a general idea of how much is coming out of your pocket. You can use your notebook or journal to take it down.

Or use this table, and input your expenses below.

Category	Cost
food	7000
house rent	3500
electricity	1000
water	320
internet	2500
home/baby supplies	1000
loan cellphone	1625
loan laptop	3625
	0
	0
	0
	0
Total	20570

2. Calculate the Yearly Expense

Input your monthly expense so that we can use the 4% rule in step no.3

Monthly Expense	Yearly Expense
	0

3. Calculate the amount of money you need

Formula: Yearly expense / 4% = Financial Freedom

Calculate Nest Egg

0

This is the target amount of your passive income that returns 4%

You can also use the 25x rule, just multiply your annual expenses by 25 to determine the total amount needed for a sustainable retirement.

The reason I use 4% is to give you an insight into the fact that there are passive income investments out there that return more than this percentage. Imagine how fast you can achieve your financial freedom.

Furthermore, the 4% rule is a time-tested method according to Bengen’s analysis for figuring out how much money you can safely spend each year in retirement. By withdrawing 4% of your savings annually, you can ensure your money lasts for the long term, even with inflation and market changes. This rule helps you determine the size of the nest egg you need to retire comfortably without running out of money.

Conclusion

knowing your target number or nest egg and leveraging investments with higher than 4% returns, you can accelerate your journey to financial freedom and enjoy the lifestyle you desire.

Now that you know your target number, we can search now for an investment that returns 4% and above. Subscribe to our newsletter to get an update and the activities of Linketh Financials.

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