Money is always a fascinating thing and most of the times it makes us run behind it again and again. One good thing about money is that it adds sophistication to our life but at the same time too much can also be a trouble.
Many people might have a dream to get a financial independence and chase their dreams. How much money do you think you will need to attain financial independence?
With all due respect to every other reply, I here would like to differ with any of the outside opinion to this question.
The idea of financial security arise from our fear to lose out in life in the absence of money. Security of certain kind is needed, but it is totally on self how much is enough.
There was a very rich man who died with astonishing 3 billion dollars to his name. He died with unfulfilled desire to acquire more because he thought 10 billion dollars would justify his life.
I doubt if he had 10 billion dollar to his name, his hunger would have been 100.. .. ..
I do not doubt that we require certain amount, but an inception of the idea of financial freedom is absolutely dangerous and irrational.
It all comes with pure self satisfaction. Two years before I thought a value equivalent to my salary then was sufficient but today it is different. I guess it will change even next year. So ya.
Quite a big question to answer.
I don't think there is 1 fixed number for everybody. But my general rule of thumb is that if you have enough money to generate passive income which more than covers you expenses, then you are financially independent.
So to calculate that, you have to ask yourself how much are your expenses annually. Then you estimate how much returns you can reasonably make from your existing savings/investments.
Say if you spend $30,000 per year based on your current lifestyle and you have $800,000 which you are relatively sure that you can get a 5% ROI from, then you are financially independent. Because, a 5% ROI from $800,000 means you have $40,000 per year but you are only spending $30,000. You are still growing your wealth by $10,000 every year.
That's perfect. This is exactly what I would also do when it comes to calculation. I know a person who calculated this way and retired at the age of 40. He is now doing lots of social activities. 😀
Thanks! A more detailed calculation should also factor in projected inflation.
And wow, I will love to retire at 40 as well and spend my remaining life doing things I find meaningful (rather than grinding at work 🤣)
Yes exactly. I'm also wondering how I can also retire at my 40. 😀
This is always a tricky question because there is absolutely no one answer for this. As a general rule, you could say that if you know what your expenses will be including everything leisure, travel etc, and if you have enough to keep you going after the 4% rule, that should be the money you will need for financial independance. Read more about the 4% rule here https://www.investopedia.com/terms/f/four-percent-rule.asp
Yes but coming up with a number is definitely possible. For example, I can keep going life long with the salary I'm getting today. It takes care of my basic expenses. If I can have a passive income ability to get today's income, then I'm financially independent. 😀
Yes I meant to say that no one else can give you that number. You will have to calculate it for yourself with the rules that you have for earning/spending etc. It is certainly possible.
Also generally people say that they're financially independent if they have income coming in without having to work a job, especially if they hate it. So, are you doing something that you really love and earning money from it? Or is that earning causing you stress?
Yes that's right. Everyone should calculate it by themselves. Most people think about financial independence only when they don't like doing a job but still they have to make money somehow.
I believe, there is no bullet proof answer for this question. It depents generaly on your own definition of independence.
And there is a huge difference between your feeling to be independend and a real independency.
That's right. Absolutely right that it is based on our own definition of independence. But surprisingly I can easily give a value for myself with a confidence that I can live a happy life with that money forever.
In my opinion, the best answer is in Rich dad poor dad, and it goes like this.
First, figure out your expenses.
Then earn money, and your income has to be greater than your expenses. Save and invest as much as you can.
Your investments should provide you some income, rent from your real estate acquisitions, stock dividends, bond yields etc. Once this income is greater than your expenses, you become wealthy.
After that point, NEVER spend more than your "passive" earnings, and keep increasing your investments with the extra money.
Great explanation. Yes that will work very well. If we can do that we should also be able to give a definite number as to how much will be sufficient for us.
100 million dollars is enough! 😉
Wow that's huge. If that was my expectation not just me but my generations would get benefited and no one will have any need to run behind money for centuries. 😉
$1 mil should help me reach financial indepence.
This is great. I guess this should be the sensible value. I also have something similar in my mind as well. 😀
Yes ☺ I'm sure with that amount one can put things in place to achieve financial independence
That's right. 👍
I had done a calculation, where at this age I need around 3.5 Cr to live happily after or to attain the financial independence.
Just curious, how old are you?
I am 30+
On an average, let's say you are 35. If you are in a Tier 1 city like Bangalore, Bombay or Delhi and would like to continue to live there, I think it will not be enough and even if it is, you will lead a very minimalistic lifestyle. Maybe other smaller Tier 1 cities like Hyderabad or Pune, yes that works. Tier 2 cities, you will be very comfortable!
That's my plan is, to stay in my village when I have that much amount saved. And do online work from the village.
If that's the case with 3.5 Cr you will be a king.
I will live life by King Size if I get that money. But that's not possible before a miracle.
Perfect. My value is also almost similar to what you are saying. I was thinking that I will need 4 crores to attain financial independence. By converting that 4 crores to a regular source of income monthly, I can manage all my expenses and start chasing my dreams.
Yeah but getting to that account is the question. We need that amount in the current value and now if we wait for it for like 10 years we might need almost double of it.
That's exactly my thought as well. My requirement two years back was half that of today. So the requirement is also continuously increasing. In another 5 years down the line. I guess 4 crores may not be sufficient for a full financial independence.
That's correct. Let's see what happens
10 mil i think should be enough for me
That's a nice and decent value. 👍