Before you can figure out what your Freedom Number is, you need to have a thorough understanding of what the term means. Only then can you figure out what number will work for you.
What Is A Freedom Number?
Simply put, your Freedom Number is the amount of passive income you need to pay your monthly bills. Passive income is money that comes into your accounts every month that you don’t need to work for.
How does a passive income create Financial Freedom? By giving you the freedom to do what you want during the time you would usually be trading your time for money.
Your Freedom Number is unique to you, because it’s based on your monthly expenses. When your passive income equals the amount of your monthly living expenses—your Freedom Number—you’re Financially Free.
Figuring Out Your Freedom Number
To determine your Freedom Number, you’ll need to consider your current monthly expenses and what you think they’ll be at the time you expect to reach Freedom.
For example, if you have children living at home now, and you expect to reach Financial Freedom in 10 years, you’ll need to take into account that they’ll be out on their own by then. Or maybe in 10 years, especially if you’ve gone through Financially Fit Bootcamp, you’ll have paid off your mortgage and other consumer debts lowering your monthly expenses.
The number you arrive at after considering all the variables is your personal Freedom Number—the amount of passive income you need to pay your monthly bills while you live the life you choose.
When you know your Freedom Number, you have a realistic goal to shoot for. And you can set benchmarks to help you celebrate your achievements as you follow the path to Financial Freedom.
Your Freedom Number Is The First Step
Of course, your Freedom Number is just the first step in the process of creating real and lasting Financial Freedom for you and your family. In addition to helping you set goals and benchmarks, the process of determining your Freedom Number will give you a better understanding of your spending habits.
Understanding your expenses lets you prioritize which are actually worth your time. Every time you pay the cable bill, you’re not just handing over the money for the bill. You’re also paying with the time you exchanged earning that money. When you look at the process this way, you realize you’re paying for the bill twice.
Adopt this perspective, and you’ll have the knowledge you need to decide which of your expenses are needs and which are wants. You’ll have the option to eliminate some of those wants and lower your monthly expenses. As a result, your Freedom Number will be lower, and you’ll be on track to reach Financial Freedom even more quickly.
As with any journey, the first step toward reaching your destination is understanding. In this case, you need to analyze your current financial situation, take into account your future and set your Freedom Number. Only then will you have a clear idea of what you need to do so you can stop exchanging your time for money.
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.