As every way, there is always a starting point and in this case, the first step to building your financial freedom is finding out how much you know today.
To start can use our calculator financial freedom, that will tell you your current financial freedom and also compare it with others in the same situation, with age and salary similar to yours. This way you can know more than the number of months you can maintain your standard of living without the income.
But if you prefer, you can also do the calculation yourself. Quiet, it does not take a mathematical genius to find the number.
How to calculate your financial freedom
In just three steps you can calculate your financial freedom and know what your starting point. You can also do this exercise at any time to measure your progress.
Step 1. Find out how much money you have
Make a calculation of how much money you would have today if you ‘d stop working. To do this you must add the money in your checking account deposits and other investments that can translate into cash in less than a week. Leave the car or the house out of your calculation because selling them will reduce your standard of living and you will not be able to transfer them quickly.
Also, it includes compensation that cobras if they voluntarily leave the job.
Suma only your money, not your partner and mentally eliminates any help from your parents, friends or other relatives. What you are looking for with this exercise is to know your independence in the world.
Step 2. Calculate your monthly expenses
Find out how much you spend each month and on what. Includes fixed expenses and variable expenses. Here are some examples.
Fixed expenses: rent or mortgage, car loan, insurance, household supplies, gasoline, mobile phone …
Variable costs: mainly leisure, but also food, clothing, household variable expenses …
No need to be something extremely detailed and accurate, but as close as possible.
The result may surprise you. If your expenses add up almost as much as what you enter, this means that you are not saving and that your income is basically paying your expenses. In this case, your financial freedom will be practically nil.
Step 3. Calculate Your Financial Freedom
The calculation is simple: divide the money you have among your monthly expenses by applying the following formula.
Financial Freedom = Amount of money available / Monthly Expenditure
If you have not already clear, we leave you a concrete example to understand better: if you have 10,000 euros should quit your job and your monthly expenses are $ 1,000, your financial freedom is 10 months.
Financial Freedom = 10,000 / 1,000
Now you know how to calculate your financial freedom.
How much financial freedom should you have?
If you are looking for an exact number of months you will not find it. Some say that we all have a mattress six months of fixed costs contingency and others put the figure at one year. The reality is that there is no concrete amount and there is not because each person is different.
Financial freedom should serve to give you emotional reassurance about money and for that reason, the figure changes according to each person. There are those who need three years of financial freedom and others who are looking for even greater security.
What you can do thanks to our calculator is to know what the recommendation depending on your age and your situation and what is the freedom of people with your profile, but from there must be you who find your number.
And if you already have clear that financial freedom is for you, sign up to the program Objective Financial Freedom and start your path.