How much money do you need to never have to work again?
About 25 times your annual living expenses.
If you spend $60,000 per year on housing, food, transportation, and all your other personal expenses, you need about $1.5 million ($60K x 25) to never have to work again.
This is also called the 4% Rule. It’s based on a study that looked at a portfolio of stocks and bonds over a long period of time to determine a safe withdrawal rate. The researchers determined there was little risk of depletion for at least 30 years if you withdrew 4% or less of your portfolio per year. In our example, 4% of $1.5 million is $60,000, hence the 25X living expenses calculation.
This gives us a target. If we can save and invest an amount equal to 25 times our annual living expenses, we are free for life.
If we make more money, we get there faster. If we spend less money, we get there faster. If we reduce our lifestyle needs, we get there faster.
My path to financial freedom has been to build businesses that make a lot of profit. I’ve set aside some of that profit so that I never have to work again.
Some other’s path to financial freedom has been to save 50-75% of every dollar made in a six-figure job for 10 years to build a sizable portfolio. They control their lifestyle expenses to stay under 4% of their portfolio and they too are free for life.
Your path can be mine, theirs, or a combination of both. Either way, there’s no reason to have to work forever.
I choose to work because my work is fulfilling. I get to grow, learn, challenge myself, and help others.
I know you can get there too.