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Find out how much Money do you need to have to achieve a state of Financial Unbreakability?

Updated: Apr 5

Disclaimer: This communication is provided for information purposes only and is not intended as a recommendation or a solicitation to buy, sell or hold any investment product. Readers are solely responsible for their own investment decisions.

 

What is considered as a state of Financial Unbreakability?

  • A person will be considered to be in a state of financial unbreakability when their monthly Passive Income equates or exceeds their monthly Expenses.

  • For example, if your monthly expenses (for housing, food, transportation, entertainment, etc) are $3,500

    • when your monthly passive income generated from your asset (ie from dividends) is => $3,500,

      • you would have achieved Financial Unbreakability.


Illustration example:

  • Let's say for example you would need $3.7million to able to achieve financial unbreakability.

    • and this amount is invested in cashflow generating assets such as (bonds, fixed deposits, REITs, dividend stocks) that will generate 4% annual returns for you

    • the passive income amount it will generate on a monthly basis is $12,333.

      • formula: ($3.7 mill x 4%) / 12 months.

  • Next, we will need to take Inflation into account

    • and for this, we can look at the past Consumer Price Index trend.


  • United States' CPI increased at a CAGR of 3.5% in the past 74 years,

    • here are how other countries fare:

  • Say if you are a 30 year old adult today, and your desired age of retirement is at 62 years old (32 years later).

    • You will want to know how much money will have the same equivalent purchasing power as $3,500 today in 32 years time.

    • let us use an estimated inflation rate of 3.5% (based on the CPI CAGR figures collated above).

    • To do this, you will need to calculate the Future Value by using a formula like this = ($3,500 x (1+3.5%)^32) = $10,523.

      • this means $10,523 will have the equivalent purchasing power of $3,500 today in 32 years time.

  • Thus, assuming all things constant, in 32 years time, with $3.7million worth of assets that can generate up to 4% returns per year ($12,333 per month), that will suffice to sustain a lifestyle for you that costs up to $3,500 per month today.

  • Remember, everyone's financial journey and goals are different, you do not have to stick to the figures above, feel free to adjust where you see fit to suit yours.

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For more in depth information:


 

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