Financial Freedom is a stage where Passive Income exceeds Expenses.
Too many a time, many find it achieving financial freedom an impossible task. With the required amount too large and the time needed too long.
Here we have a Financial Freedom Estimator, which will give you an estimate of how long do you need to achieve financial freedom.
*Note: Financial Freedom is NOT Financial Independence. (Have seen professionals mix them up.)
How to use?
Fill in the yellow cells, the variables are your Monthly Income, Monthly Expenses as well as your Annual Expected Returns/Interest.
To simply achieve Financial Freedom faster, the ideal situation is to increase your income and reduce your expenses. That has it’s constrain as everyone’s income and expenses differs.
Another variable to change is returns, by default, we set the returns at 1% per annum, which is the average Singapore Banks saving account interest rate.
Feel free to adjust these figures to your situation.
Do note that, the Financial Freedom Estimator works on a mathematical best-case scenario on the assumption that your income, expenses and annual returns are constant, which is highly unlikely. Therefore, you should only use it as an estimate.
To see how you can accelerate your speed to achieve your financial freedom, you can adjust the values with the following steps:
- Increase your Monthly Income by 10%. Methods you can increase your monthly income, doing Over-time, additional part-time job or starting a second income.
- Reduce your Monthly Expenses by 10%. Example, instead of drinking $5 per cup coffee from artisan coffee, get your coffee from coffeeshop at $1-1.80 per cup, or get instant coffee at as low as $0.25 per drink.
- Increase your return/interest rates to 1.88% with Fixed Deposits by the banks. Increase to 2.5% or 4% with CPF OA or CPF SA respectively. Or you can choose to invest and get returns as high as 20%.
Achieving Financial Freedom
Achieving Financial Freedom requires the combination of both Active Income and Passive Income for the every-man. To know about the different types of income, click here.
And of course, most Singaporean will need to take into account CPF, being a safe source of guaranteed bond-like returns, click here to find out more about CPF Life and the amount the you will receive from CPF Life.
To understand more about how to generate passive income from the stock market using little capital, click on the picture below.