Rich Habits Podcast – 33: How to Calculate Your Freedom Number

Intro

The Rich Habits Podcast is the number one business podcast on Spotify, attracting 67,000 listeners every week. In this episode, the focus is on calculating your freedom number and determining how much you need to retire comfortably. However, before diving into the topic, there is an urgent reminder to beware of a scammer account on Instagram posing as Rich Habits.

Main Takeaways

Retirement Planning and Budgeting

• 79% of American families have less than $100,000 in their retirement accounts upon turning 65, highlighting the importance of effective retirement planning.
• Creating a detailed budget is the first step in calculating your freedom number. It should include both essential and discretionary spending.
• To retire comfortably, you’ll need a nest egg worth 25 times your annual spending limit in retirement. This is known as the rule of 25.
• Knowing how much you need to spend monthly to survive and thrive is crucial for retirement planning.
• Use a reliable website to calculate how much you’ll need in the future based on inflation rates.

Investment Strategies

• Start saving for retirement early and have a specific target number to reach. Compound interest is powerful, so the sooner you start, the better.
• NEOS investments offer ETFs for generating passive income in investments. However, carefully consider the risks and expenses before investing.
• Consider paying off student loans while also investing in a Roth IRA. Maxing out your Roth IRA at $550 per month can be a wise move.
• For short-term savings, consider a high-yield savings account instead of the stock market, especially during a sideways market.
• Treasury bills are performing well and have no state or local taxes on gains. Public.com offers the opportunity to purchase Treasury bills at 5.5% interest.

Debt Management and Credit Building

• Balance transfer to a card with a 0% introductory APR to pay off credit card debt faster. Websites like NerdWallet, Credit Karma, and Bankrate can help you find suitable balance transfer cards.
• “Parked money is dead money.” This quote serves as a reminder to take action with your money rather than letting it sit idle.

Calculating Your Freedom Number

• Know your freedom number to retire comfortably. Use the rule of 25 and the 4% rule from the Trinity study to calculate it.

Wealth Building Blueprint Course

• The Rich Habits podcast offers a Wealth Building Blueprint course, covering various aspects such as earning more money through side hustles, paying off debt, repairing/building credit, and building a retirement strategy.
• Join the Discord group mentioned in the show notes for additional information and resources related to the course.

Summary

Retirement Planning and Budgeting

Retirement planning is crucial, as many American families have insufficient savings upon reaching 65. To calculate your freedom number, start by creating a detailed budget that includes essential and discretionary spending. Knowing your monthly spending helps determine how much you’ll need in retirement. Use the rule of 25, which states that you’ll need a nest egg worth 25 times your annual spending limit, to retire comfortably. Online tools can assist in calculating future needs based on inflation rates.

Investment Strategies

Start saving for retirement early and set a target number to reach. Compound interest works in your favor, so the sooner you start, the better. Consider NEOS investments for passive income through ETFs, but be sure to evaluate the risks and expenses. Paying off student loans while investing in a Roth IRA can be a smart approach. Additionally, explore high-yield savings accounts for short-term savings during sideways markets. Treasury bills offer good performance and tax advantages.

Debt Management and Credit Building

Accelerate credit card debt repayment by utilizing balance transfer cards with 0% introductory APR. However, be mindful of associated fees. Remember that parked money doesn’t grow, so take proactive steps to manage your finances.

Calculating Your Freedom Number

Knowing your freedom number is essential for retirement planning. Use the rule of 25, along with insights from the Trinity study’s 4% rule, to calculate it accurately.

Wealth Building Blueprint Course

The Rich Habits podcast offers a comprehensive Wealth Building Blueprint course. This course covers various topics, including side hustle strategies, debt repayment, credit repair/building, and retirement planning. Join the Discord group mentioned in the show notes for additional resources and information related to the course.

Conclusion

Planning for retirement and understanding your freedom number are vital steps towards financial security. By creating a detailed budget, utilizing effective investment strategies, managing debt, and participating in educational courses like the Wealth Building Blueprint, you can take control of your financial future. Start early, stay informed, and make proactive decisions to retire comfortably.