Owen Raskovitch

I guess people are sitting back thinking,

yeah i've got some debt it sucks i barely make it you know to the next week or like i'm saving a little bit i'm investing a little bit how much do i actually need to reach fire that's my question to you yeah well i'm thinking you're the math genius around here

A common rule is the 4% rule, and it might be a place to start if you're trying to work out what works for you.

So you want to be able to safely withdraw 4% of your net worth.

Let's just talk about a million dollars because I can do the math more easily there.

So you've got a million dollars and you can safely withdraw 4% from your diversified portfolio.

So you've got exposure to Australian and international equities.

You've got exposure to fixed interest products like bonds.

So it's diversified.

So the whole portfolio is not made of art or anything strange.

Or property, just not all property.

yeah because you can't just sell four percent of your house off each year yeah um so a diversified liquid portfolio that you can safely through either dividends or just selling some of the capital take out four percent each year and live on it yeah so definitely so the four percent rule effectively let's just say we have a million dollar portfolio it we expect to get a seven percent return

So $70,000 for those of you playing along at home.

And we can assume that inflation, that thing that pushes up the prices of everything each year is around about 2% to 3%.

If we say it's 3%, 7% minus 3% equals 4%.

And so we would have to effectively working that backwards, we would have to get a 7% return to withdraw 4% effectively.

Yeah.

so seven percent return to a draw four percent so you're not needed in crazy exotic returns it can just be it might just be a balanced portfolio but it's that point where you can so a million dollars liquid and you might withdraw 40 000 each year to live on yep and then that's a starting point to work on well how much do you actually need to live on each year yeah and then you've got to think about how much do you actually spend at the moment each year to live a comfortable life

And I think that's the very first thing if you want interested in financial independence and just in terms of sorting out your finances full stop.

How much do you physically spend in a year?