At what stage are you actually financially free and have enough money?

You are financially free when the **earnings you generate from your investments cover your expenses**. You no longer **must** work for the money that you need to survive.

This means that your golden goose funds lay enough golden eggs on a consistent basis so that you do not have to work a single day.

We will get into specific amounts in a bit!

There is one thing that is happening in many people’s personal finances. Money is supposed to work for them but money is just doing what it wants because they aren’t actively managing their money.

The whole point of wealth is that your **money must work harder than you**.

Your money must create so much other income for you that you do not need to work. That is financial freedom!

Of course, you may work if you like what you are doing and love to work; however, work is no longer a necessity for survival. You have reached the stage where you no longer work for money, your money now works for you; you are leveraging money. You are no longer in bondage to the daily struggle of earning a living, but free to do what you want to when you want to.

To become financially free, you first need positive cash flow and, secondly, a growing net worth.

If your liabilities are just as big as, or bigger than, your assets you are going nowhere with your net worth. In fact, you may be losing the Wealth Game. You will be facing bankruptcy in this case.

Just as you have to keep your expenses down and your earnings high to win the cash flow game, you have to keep your liabilities low, preferably zero, and your assets high to win the net worth game.

You Win The Wealth Game by winning both the cash flow and net worth game.

So when are you actually financially free and **how much money is enough**?

I am going to use round numbers because I want you to grasp the principle so that you may apply it to your situation.

Let us say you have calculated all your expenses and you get to a monthly figure of $10,000. This means that you will need an annual income of $120,000, which is $10,000 multiplied by 12 months.

When wealthy people make their calculations they use a conservative return of 5%, so we will too. This does not necessarily mean that you will earn a return of only 5%. You will of course aim for a return higher than inflation. A higher return allows your capital to grow faster and gets you to the goal line faster. For calculation purposes we will use 5%.

Consequently, 5% of your investment portfolio must be equal to your annual expenses, that is, $120,000 per annum.

How much must your investment be so that 5% of it equals $120,000?

To calculate that, you must divide $120,000 by 5% (written as 5÷100 = 0.05), that is, $120,000÷0.05 = $2,400,000.

Your investment portfolio must be $2.4 million.

Therefore, if your monthly expenses are $10,000, and using a conservative return of 5%, for you to have financial freedom, you should be aiming for $2.4 million invested in quality assets.

Now, you may be thinking: “How am I ever going to save this amount of money?”

You will need a combination of **investment strategies** to build your wealth.

For the following example I am going to assume an average inflation rate of 6% and that you are aiming for a return of at least 10% above inflation, i.e. a 16% annual return.

Using the same numbers as the previous example, saving 10% per month means you will put $1,000 per month into your long-term savings account.

If you leave the money untouched for 30 years at a rate of 16% per annum, using the power of compound interest, you will have $8.8 million in your investment portfolio.

However, if you started a bit late and you have invested only for 20 years, you will only have $1.75 million in your investment portfolio.

“Daleen, this is not enough,” you say.

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It is a sign that **the sooner** you start with your wealth-building plan, **the better**.

It is also clear that if you start later in life, you will need to increase the monthly amount you save in your investment account to more than 10% of your monthly income to try and make up for time lost.

For instance, saving 20% of your monthly income, i.e. $2,000 per month, at an average annual return of 16% will give you $3.4 million in your investment account after 20 years, which will leave you financially free.

This method will give you a **minimum investment goal**.

Even if you start late, it is possible to spend less, save more, earn more through part-time jobs and passive income with the power of compound interest, and still end up financially free.

Remember, your money is working for you. Money is never sick or on leave and it works 24 hours a day without complaining, provided you manage it according to the wealth principles and follow Buffett’s rule number 1, which is: **never lose money**.

I am not saying it is easy, but with the right attitude and doing it the right way, it will not be as difficult as you may be thinking it is.

**Others have done it; so can you**.

The question is: are you going to just sit there and let life happen to you, or are you going to make things happen in your life? Life has a way of never giving you what you wish for, but what you go for.

What are you going for in life?

Tim Ferriss said: “Think big and don’t listen to people who tell you it cannot be done. Life is too short to think small.”