9 Steps to Finding out When You Can Retire From Work and be a Free Creative
As you work through this exercise, remember: much will depend upon the practices you put into place and the habits you form along the way. And how creative you are in defining what freedom means to you and what you are able to do without to have it.
Print this blank calculator form [download blank form]
Start with rough ballpark figures.
Your figures will become more accurate each time you use the calculator.
1. What is Your Net Income?
What you get, after tax.
Put annual amount in top income circle.
2. What Does it Cost You to Live?
This is a total figure including rent and/or mortgage repayments.
An accurate figure may take a while to work out. But don’t drive yourself mad. You will get better at this over time.
Put annual amount in living circle.
3. How Much are You Able to Save?
Now subtract the cost of living from your net income.
Hopefully you will have a surplus. Put this down in the surplus area.
If you don’t have money left over— start reducing your expenses.
You will need a surplus to be free.
4. How Much do You Have Invested?
Add up all the money you have in your investment portfolio such as savings accounts, shares, superannuation, index funds, etc.
Put total investment portfolio value under the line in the investments circle.
5. What is Your Annual Passive Income (API) ?
Divide the total investment portfolio amount by 4% = Part 1 of your annual passive income (api).
Add up all the income you make from any other passive source such as: rent, sales of digital products = Part 2 of api.
Put the sum total of Part 1 + Part 2 above the line in your investments circle.
6. Can You Own the Roof Over Your Head?
If you have a mortgage put the figure you owe into the shelter circle.
An important goal here is to own your own house so you never have to pay rent again and you are no longer hostage to the whims of the economy.
There are many creative ways to do this that do not involve a massive debt.
7. How Soon Can You be Debt Free?
If you have other large debts, write these in a special red circle under shelter.
How long will it take you to pay off your debts and your mortgage using your annual surplus?
Put a debt free time estimate up next to timescale.
8. How Soon Can You Leave Your Job?
Once you are debt free, deduct your annual mortgage payments from living
Is your annual passive income (api) amount greater or lower than your living expenses?
If api is greater, then you can afford to leave your job and live off your annual passive income.
If api is lower, how long will it take you to increase your investment portfolio, using your annual surplus, to produce an api that will cover your living expenses?
9. Do You Have Ideas for Optimising your Situation?
If the timeline to leaving your job is looking too long, try to find further
income or savings to speed things up.
Putting This Plan into Action
Now you have a full picture of what it will take to become Financially Independent and therefore free to create what you like, when you like, how you like.
The Free Creatives course is designed to give you practices that will make this plan become a reality—sooner than you think!
How do you feel now?