# Financial Independence

How much do you need to stop working for money?

For me, it’s $900,000. At 4% annual yield, you can receive $3000 per month. That would cover my living expenses today. I could live off the interest and I’d never have to work again for money. I’d be financially independent.

How did I get that number? First, I checked to see how much I was spending. This includes housing, utilities, food, travel, things I buy on Amazon. I found out with $3000, I can continue living my current lifestyle.

Next, I calculated my risk tolerance. On average, the market has given a 7% return. Taking a 3% annual inflation into account, that means I could withdraw 4% annually and never touch the principal amount.

Finally, if you do the math to get $3000 from 4% interest, you’ll find that you need a principal balance of $900,000.

These numbers are pretty standard. In fact, there’s a rule called the rule of 300. This states that you can arrive at your safe financial independence number by taking your monthly income need and multiplying it by 300. $3,000 x 300 = $900,000.

$900,000 may seem like a lot to save up. If you have $60k invested without saving any more, at 7% annual yield, you’ll have over $900k after 40 years. If I invest $500 a month, I’ll have $900k after 35 years. At $1k per month, that drops down to under 27 years. Invest $1.5k per month and I can stop after 22 years.

The nice thing about this number is $18k is how much you can put into your 401k annually in 2018, before company matching.

I’m not trying to say that you should max out your 401k, or that you should strive for financial independence. However, if you haven’t thought much about your financial goals, I’ll invite you to this thought experiment and ask: What would you do if you didn’t have to work for money?