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Werner C. Duever

Financial Security Advisor
Investment Representative
Freedom 55 Financial

Countdown to financial independence – freedom calculator

What’s your freedom number? It is as individual as you are. I love talking about this number and what it represents. The larger the amount of income you achieve, the more financially free you become.

Quite simply it is the income you presently need to live the lifestyle you are presently enjoying. If say you need $50,000 per year income to pay all your bills and have enough left over for fun then this is your freedom number and if you would like to be financially independent, then you should work on building up $50,000 in passive income so you don’t have to earn a pay check.

Countdown to financial independence

There are various ways you could build up a passive income stream to generate $50,000 per year but I am only going to concentrate on two areas – investment income and real estate income. To generate $10,000 per year you should accumulate $250,000 in assets in either a TFSA, RRSP or non-registered account. Some of these investment tools are taxed when you withdraw funds, and some are not. Your accountant or financial advisor can help you with determining which one you should start taking an income stream from so that you will pay the least in tax. Also working with a good financial security advisor will help you to grow your investments more than if you try to do it on your own. Did you know that households with income levels between $35,000 and $55,000, had nearly 5 times the level of investable assets as compared to non-advised households? (1)

For real estate, it is a little more complex. If you would like to be a landlord and have several properties that generate income you should be good at fixing homes, dealing with tenants and be able to hire the right people to maintain and fix your homes. It can be very profitable if you can find good tenants to help you pay down your mortgages and the market value of the properties continue to rise.

I constantly keep track of my income streams and make projections on their growth, so I know how close I am to my financial freedom. If your income freedom number is $50,000 and you have built up $25,000 in passive income, then you are 50% to your goal. How close are you? Track your progress on a temperature chart.

So, the next step, if you haven’t done it already, is to determine your ‘Freedom Number” and develop a strategy on how to achieve it. Figure out how much you need for your lifestyle. Start with listing all your present investments and assets. Next determine how much to add to your investments and how much money you might need to purchase your first income property. Always seek out others who have been successful in doing this, so you don’t have to make too many mistakes in choosing the right investments or homes to buy.

(1) IFIC The Value of Advice: Report of July 2010