How much I need for financial independence
I hope to reach financial independence at some point. That point would be for me when I make about 2,000€ a month in passive income. At that point I would not need to work but passive income would cover all my expenses.
To reach that point I would need about 24,000€ of income after taxes a year. So, before taxes that would be something like 35,000€. Finland and taxes, we sure know how to tax. If I can get 10% return on my investment I would need 350,000€ of capital to gain it. To play it safe, I would say 500,000€ would be enough to reach that income.
How long would it take to save that
If I could save 10,000€ a year it would take me 50 years to reach that. So, I need to get my savings to work for itself so that I could reach that sooner. I really hope that I could retire when I’m 50 years old at the latest and that is 18 years away. So, I really need up my savings and make them work for me faster.
I got about 40,000€ at the moment, so I need 460,000€ more to reach my goal. I did some calculations and if I save 725€ a month and I can get 8% return on my investment, I could reach my goal of having 500,000€ by the time I reach 50. That is the target that I’m aiming.
Playing it safe
To make sure I reach that target I will try to safe more then 725€ a month and try to gain more then 8% return on my investment. Maybe If I double my investment to 1450€ a month I could reach my target 6 years earlier, just play it save that I really could retire at 50. Maybe if could get double the return on my investment I could retire 6 and half years earlier. Maybe I could be able to do both, I would be be able to retire 9 years earlier to my target.
And retiring at 50, it’s actually 20 and half years earlier then my retirement age is at the moment to get full pension from goverment in Finland. The pension systems are different in every country, but in Finland it works this way. You go to work, you get paid, goverment takes taxes and something for the pension fund. You work for a while, in my case till I’m 70 and half years old, and then goverment starts paying me my pension. Amount of the pension depends on the amount you have earned during you’re working carreer. But what I know about the system, it’s less then you made working, and it doesn’t rise with inflation, so every year you will need get by with less and less.
So to play it safe, I think it’s important for me to save something to the side that actually rises every year, like passive income streams for stock that keep raising their dividends.