7 Steps to Achieve 《Financial Freedom》: Calculate Your "Freedom Number" – How Much Money Do You Need to Save?

Freedom Comes with Wealth

Seven Steps to Financial Freedom

1. Figure out how much money you need.
2. Calculate how much money you still lack.
3. Change your perception of money.
4. Stop budgeting. Focus on what has the biggest impact on your savings.
5. Leverage your full-time job.
6. Create a profitable side hustle and expand your income sources.
7. Invest as much as possible.

Time is More Valuable Than Money

• Inflation is an invisible killer of money. It’s everywhere and always ready to devalue your money.
• Compound interest is an invisible helper of money. It’s everywhere and always ready to make your money more valuable.
• You still need to work during the prime of your life, from 20 to 40 years old, because you need a lot of experiences to help your decision-making.

What is Your Financial Freedom Number?

• Financial freedom means achieving financial independence, so you don’t necessarily have to work for money. You can find things to do for your ideals or interests. But you have to know how much money that is first!
• The more expensive your lifestyle, the higher your expenses, and the more money you need, which means you may have to work longer!
• Needs and wants are different. Many people spend a lot of money on things they don’t need, just to show off to people they hate.

5 Ways to Make Your Money Last Forever

1. Save 25 times your annual expenses (it’s actually achievable).
2. Delay withdrawing your investment returns.
3. As you approach retirement, increase the amount of your emergency fund.
4. If you really only have investment income, don’t over-withdraw because of a stock market surge.
5. Try not to touch the principal, because the principal is the source of investment growth.

How Much Money Do You Have Now?

Total Assets - Total Liabilities = Net Worth

Compile your balance sheet to present your net worth to yourself at a glance. No matter how many bank accounts you have, no matter how much money is in those bank accounts, inventory checking is an SOP (Standard Operating Procedure) for every company, and asset checking should also be your financial planning SOP.

Assets Can Be Positive or Negative. What if it’s a Liability?

Prioritize paying off high-interest debt, because high-interest debt is your biggest enemy of cash flow. Compound interest is a double-edged sword. Credit card debt usually has high interest rates, so it must be paid off first.

Managing Money is Managing Emotions

If you’ve ever bought stocks, you may “see” your stocks in a state of loss or profit. Then you will find that you are affected by the ups and downs of the stock. The more you lose, the more you fear losing more, so you cut your losses. The more you earn, the more you want it to earn more, and then it returns to breakeven or turns into a loss. Then you regret it.

Your investment has no strategy, only instinct and emotion. You forgot that you are just “seeing” it, not “realizing” it.

Daily Habits to Become Wealthy

• Often think about how to make money.
• Check on your money every day.
• Deepen your relationship with money (I can’t understand what the book is talking about here).

Accumulate Wealth Quickly

3 Factors Affecting Money

• Income: How much you earn
• Savings: How much you save
• Expenses: How much you spend

Make Good Use of Your Full-Time Job

It’s hard to get rich as an employee, but being employed can ensure you have money. Use your stable income from your full-time job to earn more outside income as much as possible during your off-hours. If your outside income can be achieved by one person, then do your best to make your income higher.

Expand Part-Time Income

No matter what your part-time income is, if you start having employees, it means your part-time income is on the right track. It may be possible to replace your job with one person’s salary and still have enough surplus. Then congratulations, keep scaling it up.

Start Investing as Much as Possible

Although the most profitable may be your main job and your part-time income. Maybe these two combined are already your business, but don’t forget that a business may have an end (the job or business no longer operates). At this time, you need to rely on savings. However, investing early and investing correctly are ways for us to amplify our assets.

The result of compound interest is unimaginable.

Eleven Thoughts Before Checking Out

How much do you earn per hour? Calculate your base wage first! Then calculate your real wage per hour! Recognize your hourly or daily production value.

Eleven Questions

1. How much happier will buying this make me?
2. How much money do I have to earn to buy this?
3. How many hours of my life do I have to exchange for this?
4. Can I afford it?
5. Don’t look at the amount, use percentages to look at the price difference!
6. Is there a cheaper one? Can I exchange it for free?
7. How much money did I spend for convenience?
8. How much money will this cost me in the future?
9. What is the value of this before it is used?
10. How much will this money be worth in the future?
11. How much of my future time can this money buy?

Set a Budget

For items that may bring the biggest expenses, plan a budget to control them. Start with the top three expense items!

1. Housing Budget
   1. Rent
   2. Utilities
2. Transportation Budget
   1. Commuting
   2. Cars and motorcycles
3. Food Budget
   1. Three meals
   2. Drinks

Make Good Use of Your Full-Time Job

• Maximize your value.
• Negotiate a raise for yourself.
  • Understand your market value (salary range of other companies).
  • Figure out how much value you have to the company (how much money you make for the company, is the cost of replacing you high?).
  • Decide how much you want to fight for and the appropriate time to speak up.
  • Speak up.
• Skills plus connections equal money.

Start a Money-Making Side Hustle

• Part-time income
  • Still requires time, but there is monetary income. For example, delivery, live streaming, or driver jobs.
• Passive income
  • Investment income, rental income, money that does not require too much extra time.
• How to invest in which side hustle?
  • Analyze your passions and skills.
    • Is there anything you like that can be linked to making money?
  • Evaluate the earning potential of the side hustle you want to invest in.

5 Steps to a Quick and Successful Investment Strategy

1. Short-term and long-term investment goals
   1. Short-term here refers to financial goals within 5 years, not financial goals after 5 days.
   2. Long-term investment financial goals will be more than 5 years and should be estimated to 30 years. “Buy” and “hold.”
2. How much money do you need to invest?
   1. Calculate each listed long-term and short-term financial goal and continue to invest in your financial goals.
3. Determine the target asset allocation
   1. Long-term goals may have larger fluctuations.
   2. Short-term goals should choose assets with smaller fluctuations as much as possible.
4. Evaluate the cost of investing and reduce it as much as possible.
5. Choose the right investment target.

Real Estate Investment

Real estate in Taiwan… evaluate it yourself.

Never Run Out of Money in Your Life: Make Good Use of Your Investment Benefits

If you really don’t rely on work income, you have to rely on good investment income. At this time, you should be more concerned about your net worth, especially the value of investment accounts used to support your life after retirement. Plan your living expenses and strictly abide by the withdrawal discipline.

Four Ways to Increase Financial Success

1. Start your financial planning now and take action.
   1. Starting is more important than success.
2. Stay focused and learn to say no.
3. Be persistent.
   1. Daily
      1. Check your net worth.
      2. Save a certain amount of money or buy a little asset every day.
      3. Think about strategies to earn an extra NT$1,000 (USD $30) today.
      4. Check what you bought and spent today. Feel how it is.
   2. Weekly
      1. Check the performance of part-time income and passive income.
      2. Check if there are any abnormalities in last week’s credit card bill.
      3. Check if there are any paid but not displayed bills.
   3. Monthly
      1. Review the performance of monthly savings.
      2. Increase the savings rate by at least 1%.
      3. Pay bills (water, electricity, gas, credit card, living expenses, etc.).
      4. Analyze your cash flow.
      5. Adjust the expected cash flow spreadsheet for the next month and the rest of the year.
   4. Quarterly
      1. Check the progress of your financial freedom number accumulation and re-analyze the goals.
      2. Check your target asset allocation and readjust if necessary.
      3. Recalculate the real hourly wage of each income source and total income and record it in the spreadsheet.
      4. Use free services to check your credit score—check for abnormalities, such as non-existent debts or payments that have been paid off but are listed as delayed or unpaid.
      5. Check the performance of passive and secondary income.
   5. Annually (three hours)
      1. Review automated investment and deduction items.
      2. Prepare to optimize and minimize taxes.
      3. Evaluate the next year’s cash flow and analyze your evaluation of the past year.
      4. Review investment account fees to ensure fees have not increased.
      5. Review annual magazine subscriptions, streaming services, and memberships.
      6. Review the annual gifting strategy.
4. Share knowledge and understand when to ask for help.

Further Reading

懶得變有錢 (Lazy to Rich)’s Conclusion

懶大

金融科技新創 CEO | 獨立財務顧問

I’m still exploring how to write a good book review. I feel that I need to condense a lot of content. This article is about a book I read in 2023, but the content is still related to people who want financial freedom. It seems that in the two years before and after this book, self-media went crazy.

The most important core of this book: time is your money, your money is exchanged for life.

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