Calculate Financial Freedom with Our New Financial Independence Calculator

How do you calculate how much money you need to be financially independent?

Becoming financially independent depends on a number of factors (for a definition of what financial independence is, read about it in our blog post here.). It requires you to have knowledge of how much money you spend. It requires you to extrapolate or predict how much your expenses will grow year after year due to inflation and what type of lifestyle you will live year after year. Once you have a sense of this, you can then set a goal to work towards. This number doesn’t have to be exact for you to gain a mental model of where you need to be. Once you start making more than your expenses on a monthly basis, you are essentially financially independent. Essentially you need to have a positive cashflow.

How can our financial independence calculator help you?

To get started you can enter your regular monthly expenses. This doesn’t include one off expenses or large purchases like homes or cars (unless you plan on paying for these things for a really long time). These large purchases reduce your usable income significantly so if you have longer term loans, include them in your assessment. We will then extrapolate this to yearly expenses. After taking account of your given average yearly inflation we arrive at the total amount of money you will have spent on those expenses after the years you have expected to live have passed. Examples of these expenses include Rent, Food, Utilities, Property Taxes, etc. These are things that you have to pay for month after month no matter your age. Adding/Removing things can also help you understand the impact of these expenses on your longer-term financial outlook.

What about my income?

After you know how much you need, you can extrapolate how much money you will need to have saved to live out the rest of your life without working. Or you can figure out how much you need to save year after year to break even at that point. We also allow you to enter how much you will make after retirement if you have any income producing assets such as dividends, or interest paying bonds, etc.

Remember that financial independence is subjective to your needs but in general is about being able to have a peace of mind about your financial situation which may or may not include having to work in order to survive. As such it is important to have a clear understanding of both your income and expenses. 

This calculator also visually shows each year of monthly income, expenses, and cashflow for your expected years to live so that you have a picture of what your personal finances may look like. Over the years you can see your cash flow increase or decrease based on where you are in life and your current situation. 

As we receive feedback, we will add to the functionality of this calculator.

Disclaimer:

The information provided in this blog post is intended for educational and informational purposes only. It is not intended as financial advice, and the content should not be construed as such.

The content presented here is based on general principles and concepts related to dividend yield and investing. Financial decisions should be made with careful consideration of individual circumstances, financial goals, risk tolerance, and consultation with qualified financial professionals.

While we strive to provide accurate and up-to-date information, the financial landscape is subject to change, and the content in this blog post may not reflect the most current developments or regulations.

Readers are strongly encouraged to conduct their own research and consult with a certified financial advisor or investment professional before making any financial decisions or investments.

The authors, publishers, and contributors of this blog post do not assume any responsibility or liability for any actions taken based on the information provided herein. All investment decisions are made at the reader's own risk, and the consequences of such decisions are the sole responsibility of the reader.