How to Calculate Your Financial Freedom Number and Retire Sooner Than You Think

One of the most empowering steps on the path to financial freedom is knowing your financial freedom number—the amount of money you need to live comfortably without working. Contrary to popular belief, this number is often less daunting than it seems.

The 25x rule is a simple yet effective formula: multiply your annual expenses by 25. This assumes a safe withdrawal rate of 4%, balancing longevity of funds with inflation adjustment. For example, if your yearly expenses are $40,000, your target savings would be $1 million.

However, this number can vary widely based on lifestyle choices and where you live. Living in a high-cost city may double your expenses compared to a more affordable area. This is where geographic arbitrage comes in—relocating to a lower-cost area can drastically reduce your financial freedom number.

Additionally, generating recurring income streams such as rental properties, freelancing, or online businesses can reduce the amount you need to withdraw from savings, lowering your target further. For instance, earning $1,500 a month passively could reduce your required savings by $450,000.

Tracking expenses meticulously and aligning spending with your values helps maintain a realistic budget. This clarity empowers you to set achievable goals and accelerate your journey to financial independence.

With your number in hand, you can confidently plan your savings, investments, and lifestyle to retire sooner and live richer.

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