When do we feel that we've earned enough and can take a step back? That's ultimately a personal decision but with the GINI coefficient going up everywhere, it's becoming increasingly apparent that the returns on labor are diminishing.
Ultimately, we all have bills to pay. Rent, utilities, grocery bills, money comes in and money goes out. It's nice not to have to worry about bills and i've found that happens when we have net assets worth 20 - 30 times our annual expenses.
Most traditional investments like property or the stock market give returns of 3 - 5% so when we have net investments of 20 - 30 times our expenses, the rental yield and dividend income can pay for our lifestyle. This is financial freedom, or at least it is to me.
While it's good to be free, it takes even more to feel rich. Is a million enough? What about two million? According to UBS, investors say that not having any constraints on their activities, is the definition of "wealth" and that tends to happen once you hit $5 million dollars.
You can read the full report at: https://www.ubs.com/content/dam/WealthManagementAmericas/documents/investor-watch-3Q2013-report.pdf A little dated but still relevant.
Here's to us working towards that magic number. I just want to say that money isn't everything, but it helps.
Screenshot of graph taken from linked UBS report
