How much money will it really take for you to be financially free? The answer might surprise you, but what's more important is a strategy that can get you there a decade sooner.

It's certainly a loaded question because there are many variables like inflation, changes in housing costs, taxes, and life changes (marriage, children, medical expenses, etc.). So it's fair to say there isn't a single, 100% accurate way to know for everyone.

However, we can make an estimate using a simple, time-tested rule.

What is the "Safe Withdrawal Rate"?

Many financial advisors base their calculations on research published by financial advisor William Bengen in 1994. Bengen wanted to find a "safe" withdrawal rate that would help retirees avoid outliving their savings over a typical 30-year retirement.

He found that withdrawing 4% of your total savings in the first year, then adjusting that amount for inflation annually, provides a high probability of your money lasting.

How to Calculate Your Financial Freedom Number (The 25x Rule)

You're probably asking, "Ok Wade, what does this mean for me?" I'm glad you asked.

A quick and easy way to estimate your baseline "Financial Freedom Number" is to take the amount of money you want to live on annually and multiply that by 25.

For example, if you wanted to live on $100,000 per year, your financial freedom number would be $100,000 x 25 = $2,500,000.

Yes, you'd need to be a multi-millionaire, but don't let that initial number discourage you. REAL Stock Investing can help, keep reading.

Remember, the 25x rule provides a baseline. Factors like potential fluctuations in the market or changes in your annual spending needs could lead you to adjust this number. Some people might aim for a higher multiple, such as 37.5x their desired income, to create a larger safety margin. Since 37.5 is 50% more than 25, this also increases your financial freedom number by 50%. Your financial freedom number with a 50% margin of safety would be $3,750,000.

The Impact of Investment Return Rate

While saving consistently is crucial, the rate at which your investments grow significantly impacts how quickly you reach your financial freedom number. The power of compounding  means that even a slightly higher average annual return rate can make a substantial difference over many years.

Let’s compare 2 scenarios, both with the same $1,000 initial investment and $655 monthly contributions, but different return rates. Using my calculator:

- 15% REAL Stock Investing return rate, would take 30 years

- 10% historical market return rate, would take over 40 years

That’s 10 more years of financial freedom!

Taking Control of Your Financial Future

By knowing the best strategy for getting the best long-term returns, you can achieve financial freedom years earlier.

Calculating your financial freedom number is a great starting point for your journey. What number did you arrive at?