This is the article following 11 Steps to Achieving Financial Independence. I shared some excellent resources in that article.
I also shared what my financial independence life looks like in 2020.
One of the most important questions you need to answer when you start this journey is, “How much do I need for financial independence?”
To achieve financial independence, your investments need to continue generating enough income to live on for the rest of your life.
This is in addition to significant savings.
You can continue doing other things you enjoy to generate money but the main point here is that you don’t have to if that’s what you want.
Let’s do a little math.
The figure is dependent on how much money you spend every year and then adjusted for inflation.
Calculating How Much You Need for Financial Independence
Assuming your annual expenses are $30,000 x the number of years you plan to retire for (let’s use 30 years for this example).
That’s $30,000 x 30 years = $900,000. That means you need to have $900,000 available to be truly financially independent.
The $900,000 doesn’t have to be cash. It can be a combination of cash, payouts from investments, rental income, etc.
You can also use the retirement calculator HERE to do the simple math on how much you need to retire.
The retirement calculator breaks down how many years it will take to get to your financial independence goal based on your savings rate.
If you’re thinking of how to get to the financial independence golden gate faster, here are a couple of things you can do.
I mentioned a few of them already in 11 Steps to Achieving Financial Independence.
1. Turn to Frugality
Start cutting down on your spending. Cut out all the excesses from your life and where there isn’t excess, look at what can be trimmed down.
Is your apartment too big for you? Downsize to a smaller apartment.
Can you downsize from a luxury car to a regular car?
Must you eat the premium extra majestic side of beef imported directly from moo moo land? Or a regular people side of beef will do?
How often do you eat out?
Thanks to quarantine, we’re all mostly stuck at home anyway so that’s more money back in your pocket but what about the post quarantine world?
Eating out once or twice a month is ok but several times a week is going to make your wallet cry.
2. Make More Money
That’s one of the best ways to fast track this process. Find ways to make extra income on the side.
If you’re well into your 30s and 40s before you start taking financial independence seriously, then it will take a very long time to get there on your regular salary.
Unless you make well over 6 figures every year then the possibility is there.
I will be covering different ways to make extra income on the side over the next few weeks. It’s the methods I’ve used as well over the years.
Get notifications whenever I add a new side hustle idea to the website when you sign up HERE.
3. Negotiate Higher Pay at Work
Do what you can to negotiate for more money at work.
If you’re not getting that, can you move into a different position in another department with higher pay.
Failing both options, are you open to moving jobs if you can get higher pay somewhere else. Look at all the options here.
At my last full-time job, I managed to wangle raises of over 20% every year in addition to more bonuses using a wide variety of techniques.
I shared these techniques in Successful Strategies for Negotiating the Pay Raise You Want.
This is one of the resources included in Take Control of Your Financial Independence Bundle. Learn more HERE.
If you can achieve all of the 3 recommendations above at the same time, you will see your savings and investment income start to skyrocket.
The calculations mentioned in the calculator above changes depending on your country or where you choose to live when you retire.
Your expenses may also be less when you retire so consider that.
Use the retirement calculator to get some basic knowledge then proceed from there.