What is Your Financial Freedom Number?

Financial Freedom

Why do you go to work every day? Is it to pay the bills, take a two week vacation, put a bit aside for the future, and call it a day? Or do you strive for something more? Most of us just want to have “enough.” Enough to do what we want, live where we want, and work only as much as we want to. But what is your “enough”? What does financial freedom look like to you?

What Is Financial Freedom?

The term “financial freedom” has such a nice ring to it. It conjures images of security, independence, leisure, and opportunity. When it is defined, the phrase means that you have sufficient personal resources to live without having to work to cover the basics. It means you have the time and resources to pursue fulfillment in your life.

The sobering truth is that most of us have no idea what our financial freedom number is. We don’t know the amount that we need to live the life we desire in the future. And if we don’t have this number in mind, we are shooting at a target blindfolded. We don’t plan or strategize because we don’t know what we are aiming for.

In a recent Retirement Confidence Survey, the findings state that only 21 percent of workers are very confident about having enough money for a comfortable retirement (1). Globally, HSBC reports that retirement is not the primary savings priority for 85% of working age people and that 29% of retirees who did not prepare adequately for a comfortable retirement were not aware of how much they needed to save (2).

Why have so few of us actually calculated our financial freedom number? Are we just unaware of the consequences? Too busy caught up in daily life? Or do we fear that our number will be out of our reach and want to avoid the discouragement?

The exciting reality is that your financial freedom may be closer than you think. But without working to define your personal freedom number, it’s impossible to make progress towards it. I encourage you to take a few minutes today to calculate your financial freedom number.

How to Calculate Your Number

There’s no need to overcomplicate the calculation or do extensive scenario planning. The basic rule of thumb for the financial freedom calculation is that you will require about 20 times your current salary, assuming a 5% rate of return, to keep your current lifestyle.

First, you need to have a realistic view of how much money you require to maintain your present lifestyle. Your lifestyle expenses include everything you incur monthly. Let’s say, after adding up the costs of housing, basic living expenses, education, taxes, etc., you come with the monthly sum of $10,000. Multiply that number by 12 and your annual cost of living is $120,000. Twenty times that amount is $2,400,000. That is a rough estimate of your financial freedom number. Don’t let that number scare you. All it takes is some planning to get there.

What number did you come up with? Is it more or less than you expected?

What To Do With Your Number

Once you’ve calculated your financial freedom number, you’ll want to create a game plan to obtain it. This is where I come in. Though my RichLife wealth planning process I work together with my clients to identify their number and create a plan for how to reach that number. Often, my clients are thrilled when they realize there are options available to achieve financial freedom in less time than they expected.

Once you find your number, make a point to keep it at the forefront of your mind and come up with different strategies to get there. If the goal of your life’s work is to reach complete financial freedom, this process will help you identify the shortest path between where you are now and where you want to go.

Finding true financial freedom may be closer than you ever thought possible. To learn more, download our free report, 12 Keys to a Successful Retirement Strategy today. If you need help, call my office at 770.249.7424 or email me today at beau@richlifeadvisors.com.

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(1) Helman, Ruth, Craig Copeland, and Jack VanDerhei. “The 2016 Retirement Confidence Survey: Worker Confidence Stable, Retiree Confidence Continues to Increase.” Employee Benefit Research Institute, no. 422 (March 2016). Accessed June 3, 2016. https://www.ebri.org/pdf/surveys/rcs/2016/EBRI_IB_422.Mar16.RCS.pdf.

(2) HSBC. “The Future of Retirement – A Balancing Act – HSBC Canada.” HSBC Bank Canada. 2015. Accessed June 3, 2016. https://www.hsbc.ca/1/PA_ES_Content_Mgmt/content/canada4/pdfs/personal/for-balancing-act-global-report.pdf.


About Beau Henderson

Beau Henderson is a financial advisor, author, coach, radio personality, and CEO of RichLife Advisors. He has helped over 3,000 clients to not just improve their relationship with money, but to live the life of their dreams.

1 Comment

  1. Paul on June 28, 2016 at 12:06 pm

    Hmmmm…..I like your simple rules of X x salary, and expenses.

    For entrepreneurs it gets a bit more complicated. What is your business(s) worth today….and what would they be worth in the future if you sold or if you retained and had an ongoing income stream. Do you have debt against it (them) and at what rates are those debts being paid down. When those are multiple layers ( target dates ) again more complicated.

    another layer when you add cash value life insurance policies that can be drawn down if needed, or are in fact a part of your retirement planning. Of course there are also death benefits depending on when you die and which spouse dies first.



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RichLife Advisors, LLC provides investment advisory services through Fiduciary Capital, Inc. Beau Henderson is a licensed life insurance professional in GA, SC, TX, CA, IL, KY, OH, MI, PA, MD, and NY.

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