financial freedom goal: break it down

[GreenHouses]

The goal of financial freedom can be daunting, especially when you are starting out.

So it is helpful to break the goal down into smaller parts, or milestones along the way.

When you reach the milestones, you can feel a sense of accomplishment, and know that you’re making progress.

Something I’ve found really helpful is to set milestones by relating a certain amount of passive income to different components of my living expenses.

For example, your annual living expenses might be $60,000 per year, broken down as follows…

Tax - $12,000
Mortgage payments or rent - $18,000
Food - $10,000
Car expenses - $3,000
Insurance - $2,000
Holidays / fun - $5,000
Other - $10,000

So once you have say $10,000 of passive income per year from your investments etc, you can say to yourself that your passive income covers your food bills for the year. Cool! Once you get to $28,000 passive income per year, you have covered both your mortgage (or rent) AND your food expenses. It’s a wonderful feeling when you reach these milestones. It gives you a taste of what it will feel like when your passive income exceeds your living expenses and you’re financially free.

You may instead prefer to relate your level of passive income to covering x number of months of your living expenses. For example, using the above figures, once you have a passive income of $5,000 per year, you’ve got one month worth of your living expenses covered and so on.

Break it down however you like and have some fun with it.

 

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