True Financial Freedom
How do you really obtain true financial freedom? Basically to create a passive income that would cover all your monthly expenses, plus give you extra money to do whatever you want! I came across Mr Free at 33’s Blog. In this post of his he talks about the true cost of everything we buy/need/want. “In my view, the true cost of expenses is how much capital would be required in order to generate the passive income necessary to cover the associated expense. ” – Mr Free @ 33
True Financial Freedom
I love this idea, and by really crunching the number’s I think it will help me cut the stuff we don’t need. It will also help encourage me to continue to make saving a priority. I know what we spend roughly every month and now I must do the math.
First things First, I got to figure out the average yield of my portfolio. By adding all the yields up and dividing by the number of stocks I own. My average yield is %4.72, not bad at all! Let’s say I want that reese’s peanut butter cup once a week. I’m not no twig so I got to have the 4 pack. mmmmmmm! oh yeah. So that’s costs me 1.50 per week. How much money in stocks do I need to support that habit for the year? Well if I continued averaging 4.72% for the year, I would need $1525.42 invested to continue that $1.50 a week habit.
Now Let’s Calculate The Real Stuff
This post will list my real monthly expenses and calculate how much of a portfolio I would need to carry the life we currently live. Let the fun begin!
Mortgage and Property Taxes Bi Weekly – $1100 or $2200 Monthly
- $26,400 yearly ————— We would need $559,322.00 Invested to Carry our mortgage and property taxes.
Water Heater Rental, Hydro and Water – Average $160 per month for all 3
- $1920 —————– We would need $40,678 To Carry these bills.
Cable, Netflix, Internet and 2 Cell Phones —— Monthly $260
- $3120 ————— $66101 Needed
Insurance on our 2 cars and house – $360 Monthly
- $4320 ———————- $91,525
Gas for our 2 cars for the month —- $300.00
- $3600 ———————– $76,271
Groceries for the 3 of us plus dog food monthly —— $450.00
- $5400 ————- $114,406
We got it good, one of our aunts watch our son for $25.00 a day or roughly $500 a month
- $6000 ————– $127,118
Additional Expenses (Entertainment, Maintenance,Gifts, Etc)
I think $800 monthly for additional expenses seems right, some months we are over some we are under.
- $15,600 —————- $203,389
Well I think that generally covers everything. Of course Investing is not included as this is the math to our financial freedom. So the total monthly expenses comes out to $5030 or $60,360 per year. Based on our current average yield of 4.72% we would need $1,278,813 Invested to live with complete financial freedom. Of course things can happen to throw these number’s even more off. A car break’s down and we need to get a new one (we never buy brand new) or roofing etc etc. I didn’t even account for all the vacations we would go on if we were retired.
Writing this down and talking it over with the wife, was really good. It’s pretty insane when your spending that much more on your cell phones/internet/cable then your necessity’s Hydro/Water/water heater. Talking can only go so far though, we need to take action. Maybe something like cancelling netflix would get the ball rolling. (we have a android box anyways) Be sure to check out Jason’s Blog. (Mr Free @ 33) Clearly he has some great ideas. What do you guys think? Are our expenses way to high? What would you cut first?