The BRICS TimesIf you are weary of the daily job or running your own business and dream of quitting it all for a peaceful life, emotional factors alone should not guide your decision.
If you are weary of the daily job or running your own business and dream of quitting it all for a peaceful life, emotional factors alone should not guide your decision. You must correctly assess your financial standing first. Understanding your future expenses helps you prepare for this major life change.
This formula is largely rooted in mathematics. It is known as the Financial Independence Number (FIN). The Financial Independence Number is the specific amount of wealth required. This sum allows you to live comfortably without a job or business. You need this fund ready before you quit working. This ensures you have no regrets about your important decision.
What is the Financial Independence Number?
The Financial Independence Number is the corpus that covers all your expenses for a long period without any earnings. This figure includes your monthly spending needs. It also covers rising inflation and medical costs. Furthermore, all expenses related to maintaining your desired lifestyle are factored in.
For instance, if your monthly expense is ₹1,00,000. This totals ₹12 lakh per year. To comfortably manage this expense for the next 25 years, a fund of roughly ₹3 crore is necessary.
How is this FIN Calculated?
To determine your Financial Independence Number, you must first assess your current monthly expenses. Carefully evaluate rent, EMIs, children’s education, and medical costs. Understand the expenses in your daily lifestyle as well. Then, you need to add the inflation factor to this sum. If inflation averages 6%, your expenses will naturally increase in future years.
Also, find out the average return on your investments. If your investment return is higher than the inflation rate, you can easily handle your expenses. By considering these three main points, you can calculate your Financial Independence Number.
