Financial freedom – that’s a goal for so many entrepreneurs.
What does it mean though and how do you achieve it?
In this video Arianne Lemire talks about how to calculate your Freedom Fund and put yourself on pace to hit it!
Transcript:
This is just how you calculate your passive income number. Right. Your freedom plan is how much money you need to invest to have financial and time freedom. The way you figure out how much you need is by getting your yearly passive income goal and divide that by your rate of return. Let’s assume you can make 10% average return on your money. Your monthly needs are $5,000 a month which is $60,000 a year.
You divide that $60,000 with you need to make each year in passive income by 10%. That equals to $600k. Meaning, if you can invest $600k in investments that can give you a 10% return. You can be financially free in level one living in peace, where your passive income pays for your all of your needs.
I think that should be everybody’s initial goal because once you get to that point, you can do a lot more with your life. Right. Even if you don’t want to not work, you can still focus on the work that you actually are passionate about. Usually, that’s where you make the most money anyway. When you work on something that feels like it’s net worth. Like, you enjoy it, you’re passionate about it, just want to help more people and you don’t really care about how much you make.
That’s usually where you make the most amount of money. Now, here’s level two, financial freedom living in comfort. It’s when your financial freedom friend or your passive income pays for your needs and wants. In this example, this versions number is $10,000 a month or $120k a year.
We’re going to divide $120k divided by 10. We need $1.2 million invested at 10% to make $120k a year in passive income. The great thing about it is that’s forever. Right. I know $1.2 million sounds like a lot. But if you can hit that in the next 2, 3, 5 or maybe you’re there now. You seriously don’t have to work anymore. You can focus on passion projects. This passion businesses that you actually want to start.