Jaspreet explains a simple rule: divide your annual expenses by 3% to 10% to find how much you need invested. Need $50,000 a year? That's between $500,000 and $1.66 million depending on your yield. Get there by spending less, earning more, or investing in dividend stocks and real estate.
Questions this video answers
3% to 10% cash-flow yield.
Between $500,000 (at 10% yield) and $1.66 million (at 3% yield).
Chapters
If you wanted to stop working tomorrow, how much money do you need to put aside? That way you can live your life financially free. So I like to generally follow the 3 to 10% rule, which means if you need $50,000 a year to live your life financially free today, then you want to take that $50,000 and divide it by 3% and divide it by 10%, which means you would have to put aside somewhere between $1.66 million, assuming you can get a 3% cash flow yield, or on the other end, $500,000 put aside. If you get a 10% cash flow yield, which means you'd have between half a million dollars to 1.66 million dollars to be able to generate that $50,000 a year to be able to live your life financially free. And now your job is to figure out, well, how can I put aside this 500,000 to $1.66 million as fast as possible. That way you can be financially free. Now, there's a couple of ways that you can go about doing that. You can work to spend less money. You can work to earn more money. You can do this through your cash investments, through your stock market dividend yielding investments, through your real estate investments. Or potentially this is now true financial freedom. Because if your assets are paying for your expenses, well, now you're financially free. And you might be wondering, but Jaspreet, what about inflation? The cost of living also goes up and things get more expensive, right? And you're right. But this is why, if you own the right assets, the cash flow that you generate will also increase with inflation.
