Path to financial freedom: Calculate your Freedom Number, manage debts wisely, invest for passive income, and embrace key financial habits. Explore the journey to a life where your finances align with your goals and dreams.
Financial freedom is having enough money to live on for the rest of your life. I believe that most people can become financially free if they know their goals and dreams by learning how much money you need to live on forever. Financial freedom refers to a state of financial well-being where an individual or household has the ability to meet all their financial needs and goals without being constrained by external factors. Achieving financial freedom typically involves having enough income, savings, and assets to cover one’s living expenses, debts, and financial goals without the constant worry of running out of money or relying on others for financial support. Blog post about personal finance http://dorianfinance.com/personal-finance-101
Take your average annual expenditures times 25 = Freedom Number. Let’s start low to high expenses per year.
$24,000 per year times 25 = $600,000
$48,000 * 25 = $1,200,000
$72,000 * 25 = $1,800,000
$100,000 * 25 = $2,500,000
$1,200,000 * 25 = $30 million
$12 million * 25 = $300 million
$50 million * 25 = $1.250 billion
The main topics of financial freedom are:
Debt-Free: Being free from high-interest debts, such as credit card debt or personal loans, is a crucial step towards financial freedom. Paying off debts reduces financial stress and frees up money for other purposes. I know that personal finance talks about zero debt but look at the top 100 companies balance sheet and you will see billions of dollars of debt. Debt is only bad if it’s high-interest debts, if you have a home loan that is 3% and you can get investments that grow more than 3% you will be better off having some low-interest debts.
Savings and Investments: Building a substantial savings cushion and investing wisely can help grow wealth over time. This can provide a passive income stream that covers living expenses without the need for a traditional job. Blog post how to invest? http://dorianfinance.com/investing-101
Multiple Income Streams: Diversifying income sources, such as through investments, side businesses, or passive income streams like dividends, can provide greater financial security.
Living Below Means: Living within or below one’s means is an essential habit for achieving financial freedom. It involves budgeting, saving, and avoiding unnecessary expenses.
Emergency Fund: Having an emergency fund can protect against unexpected financial setbacks, such as medical expenses or job loss, without derailing financial progress. I always thought of my investments like stocks as my emergency fund but I think having a high yield savings account that you can withdraw from to be safer because you can save 3 to 5% return on your money per year.
Financial Goals: Setting clear financial goals and working towards them can provide a sense of purpose and direction. These goals may include saving for retirement, buying a home, or funding education.
Financial Education: Gaining knowledge about personal finance, investing, and money management is crucial for making informed decisions and growing wealth. Another blog post about financial education http://dorianfinance.com/financial-literacy-2023
Asset Accumulation: Owning appreciating assets like real estate or investments can help increase net worth over time, contributing to financial freedom.
Lifestyle Choices: Making conscious choices about lifestyle and spending habits can significantly impact one’s ability to achieve financial freedom. It often involves distinguishing between needs and wants.
Retirement Planning: Preparing for retirement is a key aspect of financial freedom. This includes saving for retirement accounts like 401(k)s and IRAs.
Financial freedom is a personal journey, and what it means can vary from person to person. Some may aspire to retire early and travel the world, while others may aim for a more modest and stable financial future. It’s important to define what financial freedom means to you and create a plan to work toward it. Additionally, seeking advice from financial professionals or mentors can be valuable in achieving your financial goals.
