Do you know how much money you need to be financially independent
if you're working yourself into burnout, doing multiple jobs or side
hustles, trying to earn more money, but you still feel frustrated
because it feels it's so far away that you can become financially free.
Well, look no further, because in today's video,
I'm going to show you exactly how to figure out how much money you need
to reach your financial independence, but also how to build a system
that allows you to do exactly that.
So let's dove in. So what's your number?
Most people think that you have to be
at least a millionaire in dollars in order to be financially free.
But very few have actually done the math.
So here's what I want you to do, first of all.
Write down your age, the age that you currently have 20, 30 more.
Then I want you to write down the age when you want to
officially stop working for money.
So generating active income.
And that could be the age that most people in your country retire.
For example, in Europe, that's somewhere around 65.
It could be much, much earlier, like 50 or even sooner.
The only thing that you need to keep in mind is that it needs to give you
enough time to build a money machine.
And I'll explain in a moment what that is and how to do it.
But you definitely don't want to say that you want to do that tomorrow
or next year because it doesn't give you enough time.
And also it makes you highly dependent on the market circumstances.
So what you want is to have at least a 10 to 15 at minimum
year time frame for you to build that money machine.
This typically covers at least 1 to 2 financial cycles and then you know
for sure that you don't depend on any kind of macroeconomic circumstances.
And now comes the fun part.
What you do next is you get to dream.
So what I want you to do is split a piece of paper
or an Excel sheet into three sections.
Section number one is going to be your minimum lifestyle.
Section number two is going to be your same or similar lifestyle
as you currently have.
Section number three is going to be your ideal lifestyle.
Now let's go back to your first section, your minimum lifestyle.
This one needs to cover the minimum monthly expenses
that you need to be able to cover from your passive income.
When you stop working
or generating any kind of active income and you need to think about that
per month for you and your household, your spouse, your kids, if you have any.
And typically what you include here would be your housing.
So it could be your mortgage or your lease or your rent.
The next section would be your food.
So how much do you spend per month on groceries?
Then you want to include your health insurance, your transportation.
So that could be your car lease or gas.
And then you want to include
any other kind of monthly expenses that you absolutely must incur.
If you have children, that could be their education.
All right.
Now you want to add all of these up and see
what is the minimum amount that you need to generate
every single month once you reach financial independence.
For me, that is somewhere around 7000 francs, and that is
because the lifestyle here in Switzerland is quite expensive
and even minimum expenses tend to be quite high.
So what's your number?
Are you surprised that is much lower than you expected?
Well, I know I was and a few years ago when I did this exercise
for the first time and I realized, well, I'm actually already at that level,
I am already making that, it was totally unbelievable.
So let's move to the next section.
So when you look at your current situation,
what are you spending money on that allows you to have the lifestyle that you do?
And how much does that realistically cost you every single month?
Maybe that's going out every now and then, or maybe going on holidays
or maybe buying clothes and shoes once in a while.
Or it could be investing in yourself, in your education,
and through courses, in books. Write that down.
But I want you to estimate how much it realistically costs you per month.
And I think this is a great opportunity for you
to go through your monthly expenses and figure out
what are you spending money on that maybe you shouldn't.
I can promise you that you will find a few subscriptions
that you are still paying for and that you haven't used in a while.
Fantastic.
Now I want you to add up all of these numbers and create a total
for this section and then add this total with that of the previous section.
Congratulations.
This is the amount that you need to make in sustainable passive income
in order to be able to have the exact same lifestyle
that you have right now, but without doing any of the work.
I think that's pretty cool, isn't it? I'm curious what your number is.
Let me know in the comments down below.
In my case, that is about 11,000 francs.
Now we move to the next category,
which is the most amazing one, and that is your financial freedom number.
And here I want you to add anything that you would like to be able
to afford that would make you really, really happy.
Maybe that is a better house or a nicer one.
How much would that cost you?
And I want you to think in mortgage per month, not the total amount
that you would pay for the house,
but if you were to take a mortgage right now, how much would it cost you per month?
Maybe it's a nicer car.
How much would you pay to lease that car?
Maybe it's going more often on holidays.
How much would it be per month?
Maybe it's flying business class or first class only.
Or maybe going out every single week.
You know what that is?
Write down everything.
And now I want you to add up all of the items in this section
and then create a total between section number three, section number two,
and section number one.
That is your financial freedom number.
Come in below and let me know.
I'm curious if it is above 10,000.
Is it above 100,000?
I'm pretty sure
that's not the case because most people, when they do this exercise,
they realize that actually they only need at max a couple hundred
thousand dollars per year to be absolutely happy and financially free.
So what's your number? All right.
Now that you know exactly how much money you need per month or per year
to reach that financial freedom, you need now to figure out how much money
do you need to save and invest
that will be able to generate you this money per month or per year on autopilot?
So let's say that you wanted $100,000
per year for your financial independence.
Well, assuming a 10% return on investment,
that means you would need to raise, save and invest $1,000,000
by the time you decide to stop generating active income.
In order for you to be able to afford the lifestyle that you want
and don't worry, you don't need to become a financial expert.
There are many calculators out there.
I'm going to link a few in the description down below that you can use to back
calculate how much money do you need at the age
when you want to officially retire so that you can afford that lifestyle?
And then it will also tell you how much money per month
you actually need to save and invest
in order to be able to reach that goal.
Now, speaking about saving and investing, what do you actually do with the money
that you're currently saving
in order to be able to generate you all of that passive income later in life?
Well, here's my recommendation, and if you want, I can create
a totally separate video and go into a lot more detail.
But my suggestion is that you have a diversified portfolio.
So number one, you can invest in dividend yielding stocks.
So that means the stock market.
And of course, that can be more or less risky
depending on how you choose to diversify your portfolio.
But the easiest, simplest way is to go for the S&P
500 or Vanguard and to put your money there.
And obviously, the longer you hold that investment,
the larger the dividend that it will yield.
In my case, for example, my husband and I do have stock investments
and they are very diversified and they generate us somewhere
between three and $7,000 per month, depending on the market.
The second option you have is to invest in real estate.
And of course, you don't need massive amounts
and you don't need to buy buildings and buildings.
You can start with the small property
and you can have that make money for you by renting it out.
And you don't have to go for a long term rental.
You can also do short term rental via Airbnb.
The third
option is for you to invest in businesses, and that could be your own business
that you've always wanted to start, or it could be in someone else's business.
And that makes you an angel investor, and you can do that very easily.
Nowadays, online, there are many platforms that allow you to do this.
I'm going to link below a couple that you can check out.
We fund our Cedars Angel list.
There is a lot of them
and you can go and invest in small businesses and startups that way.
Or if you have more money
that you can dedicate to this, you can always go into private equity
and there are many, many options for you there as well.
Number four is investing in medium term passive income streams.
And I've made a dedicated video about this a couple of weeks ago,
and I'm going to link that down below as well.
You can do anything from selling digital assets to YouTube videos.
And then last but not least, invest in yourself, developing your skills
and making yourself better allows you to charge more
for your services,
which means that you'll be able to save a lot more in the short term
and get to your financial goal a lot quicker.
I hope you see how important having a money
machine can be for your long term financial freedom
because money that you save and don't invest, that it doesn't generate
you any return is not a good long term strategy because at the end of the day,
with the level of inflation rates going up, your money is worth less and less.
Every single year.
So you want to make sure that whatever you're able to save, you put in something
that generates you an income, a return every month and every year.
This gives you so much more control over your financial freedom
and allows you to depend a lot less on your job, for example.
All right, you guys, thank you so, so much for watching.
That was it for today.
Comment down below and let me know if this was helpful.
Share with a friend who you think might need to hear this.
And until next time, I recommend you go ahead and watch this video
where I talk about a lot of passive
income generating streams that you might want to consider
and that will generate you some money in the next 30 days.
Thank you and I'll see you next time. Bye.