Create a Clear Path to Financial Freedom with This Simple but Powerful Tool

Schedule a FREE Strategy Session

Transcript:

I think I showed the Net Worth Calculator, but let me show it in the context of the Financial Freedom. If you go to Google Drive and search Financial Freedom, the document is called “What Does Financial Freedom Mean to You?”.

You’ll have to make this document your own. So you go “File, Make a Copy” and you can plug your own numbers into here.

Basically, this is helping you plan against the levels of financial security.

I went through this at Wealth Mastery in Fiji probably 3 or 4 years ago. These were my numbers at the time, and the numbers have changed since then.

Financial Protection & Security

This basically says that if our monthly bare necessity to live expenses are about $5,000/month, your first level of financial freedom is financial protection, so having an account with x months put away ($30,000 for 6 months in this case).

Then you want to figure out the critical mass, so what amount of money could I have in a savings account, earning a rate of return of 6%? That number would be $1,040,000 in this case where if it threw off 6%, it would throw off enough money for me to be financially secure and pay for all these expenses.

Financial Vitality

The next level is all the basic living expenses plus basic entertainment, savings for college education, any kind of luxury items you might have. If everything hit the fan, I could live my life as it is right now, for about $104,400 per year. If I divide that by 0.06, you get the critical mass. So if I had $1.7M in an account earning 6%, it would throw off enough for me to handle $8,700/month without depleting that amount.

Financial Independence

Let’s say I would need another $5,000/month for more comfortable living expenses. That would bring the critical mass to $2.7M.

Financial Freedom

If I increased even more to $20,000/month to spend after tax, that would be pretty much any lifestyle I could imagine. Knowing that I could live on $8,700, spending an additional $11,300 would mean I need $4M in the bank, earning 6%.

Absolute Financial Freedom

This would be me having to spend $40,000 per month, and that critical mass number is $8 million. That’s the number I keep in my mind; it’s the number I have to hit to have the choice to unplug, if that makes sense.

Net Worth Calculator + 1 Year Planner

Going through and calculating your net worth on a consistent basis is very, very important. Make this your own, change the date and numbers, and print this out every quarter.

Put an appointment in your calendar for January 1, April 1, July 1, and October 1. You’re just going to print these out and go through all of your accounts: the value of your residence, mortgage, credit cards, checking, savings, investment accounts, and any other debt or loans.

This is just a snapshot in time that you’re printing out, and I do always suggest printing them out. Even if it’s negative you’ve got to deal with it.