Clarity on Your Freedom Number
e just finished one of our major member events in Dallas, and it never fails that I see our members gain the most clarity along their path to real freedom –
which starts with financial/economic freedom.
That's the goal that everybody wants to get to, but because of traditional financial modeling, most people accumulate as big a pile of assets as they can – 401(k)s, mutual funds, index funds, stocks, bonds, real estate, gold, Bitcoin, whatever it is. That's the game that people are told to play. The problem with that model is that there is no end. I’ll say it again: There is no end.
The best financial advisors I know, who have their heart in trying to help their clients, just tell them to keep accumulating as big a pile of assets as they can. Then when you “retire” or stop your active income, you're going to start chiseling away at that nest egg. The question is: When do you know you have enough?
We are seeing the onset of high inflation that we haven't seen in this country for about 40 years. We're seeing that ramp up big time. Costs are going up. Interest rates are going up. The stock market is likely to take a big correction at some point, which is never a good thing for people who are thinking about ending their active income.
So while this traditional financial model looks good on paper when we're in a bull run market, those bull runs run out. Then we go to the other side of what I call the “full cycle.” Most people have not gone through a full cycle. Most advisors have not gone through a full cycle, or if they have, it was so long ago that they've forgotten and they don't really have a model to contend with that today.
The real key is to get clarity on what your Freedom Number is – the amount of your active income that you need to replace in order to sustain your lifestyle. You figure out what your monthly lifestyle burn rate is, then multiply that by 12 and gross up for taxes to determine what the number is on an annual basis. Then to determine how much capital you need, you divide that number by your rate of return (in Freedom Founders, we use 10%).
For example, if your monthly burn rate is $20k, when you multiply that by 12 and gross up for taxes, you would need $319,200 annually – so based on a 10% rate of return, you would need $3.2M in assets. If you would like to see this in more detail, you can watch my training on calculating your Freedom Number here.
That’s the model we use in Freedom Founders – it's a simple model, but what it gives is clarity. When your goal has clarity, and you can see yourself moving towards that goal (even if you're not going to hit it for a handful of years) it gives an amazing amount of freedom. It dramatically reduces compression and stress for those who are on the treadmill of “I don't know if I'll ever be done.”
It's a huge change. And I see that over and over again in our community, both for those who have already become Free for Life® (meaning that they've hit that number) and for those who are on their way there. The smiles, the changes, the reduction in stress for our couples – it’s huge.
P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :
1. Schedule a Call with My Team:
If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest. www.freedomfounders.com/schedule
2. Get Your Free Retirement Scorecard:
Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Go to www.FreedomFounders.com/Scorecard to take the 3 minute assessment and get your scorecard.
3. Ready to Step Away?
“How Much is Enough?” This simple question keeps hard-working professionals at the hamster wheel of active income far longer than they need to be. Watch this free training, and discover a proven model for determining how much you really need before hanging up the handpiece! www.freedomfounders.com/training