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How much is enough?

Three steps to achieving financial freedom.
The real secret? Limit your monthly lifestyle costs as much as possible. Picture: Shutterstock

Many of us are working hard to earn enough money to stay afloat while we try to save every month so that we can be financially free one day. The idea of financial freedom is captivating. However, very few people know what to do to achieve this. In short, do you know how much is enough for you?

Financial freedom is not the same as wealth 

I believe it is possible for nearly everyone to be financially free but very few people will be wealthy. This might seem like semantics but there are big differences between the two.

Financial freedom is when you have enough income from your investments to cover your lifestyle costs every month without depleting your capital.

Being wealthy is usually linked to a specific size of assets. For example, someone who is worth R14 million or US$1 million would be considered wealthy in any country. However, if you are worth R14 million and spend R100 000 per month on your lifestyle, you are wealthy but not financially free. This is because you are going to erode the value of your capital within 10 or 12 years. Someone who is worth R7 million and spends R26 000 per month is financially free because the amount required from the capital is not too high and therefore the capital will probably be maintained over the person’s lifetime.

I believe there are three steps to financial freedom.

1. Be debt-free

You should not owe money on credit cards or for personal loans or overdrafts. In fact, it would be ideal if you had no debt at all. The only acceptable debt would be for ownership of assets where your income and capital are likely to increase in value faster than inflation. In most instances, this would be debt on a rental property or business.

2. Have an emergency fund

You should have a cash account or money market fund where you hold enough money to cover your monthly lifestyle costs for a minimum period of three to six months. In other words, if you spend R20 000 per month, your emergency fund should be between R60 000 to R120 000 in value.

3. Use income from assets to cover your expenses

It is important to know how much you spend in an average month on your lifestyle. This amount should include your regular monthly expenses (groceries, data, entertainment, clothes, transport and so on) as well as irregular expenses like holidays and replacing vehicles. If you spend R200 000 every five years on a replacement vehicle, you should add R3 334 to your monthly lifestyle costs to cover this.

Once you have identified what your average monthly lifestyle costs are, multiply this by 300 to determine how much capital you will need to be financially free. Let’s consider the example of someone who spends R20 000 a month on their average lifestyle costs. If we multiply this by 300, we get to an amount of R6 million.

If the person was to invest this R6 million in a typical balanced unit trust, they would get an average return of 10% a year, after costs. If inflation is 6% per year, that means they can still draw 4% a year to cover lifestyle costs. A withdrawal rate of 4% is R240 000 a year or R20 000 per month. I’m sure many people will point out that balanced unit trusts have not delivered 10% over the last few years, but over the last 10 years the average balanced unit trust has generated 10.45% per year.

The secret

The real secret to financial independence is to limit your monthly lifestyle costs as much as possible. If you keep your monthly costs really low, you will need a very limited amount of capital to fund your lifestyle in future.

There is an entire movement called FIRE (Financial Independence, Retire Early) that has gained popularity over the last few years. This lifestyle movement is about achieving financial independence and being able to retire early should one choose to do so. If you like the sound of this, there is a huge amount of information on the internet about how to limit your lifestyle costs.

Warren Ingram is executive director of Galileo Capital.

The views and opinions shared in this article belong to their author, cannot be construed as financial advice, and do not necessarily mirror the views and opinions of Moneyweb.


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Great that the FIRE movement is getting exposure.

However, I will add the number item above everything else to attain FI is savings rate. While mentioned at the end of the article, it is by far the most important factor. It’s importance cannot be overstated. In fact, these are my top three tips to achieve FI

1- Savings rate. A single item with 2 amazing benefits. Cut back on expenses reduces your FI amount, then increases the amount you are able to save and invest. Bigger savings with a smaller target leads to FI much much quicker. I cannot overstate the importance of this item.

2- Costs and tax efficiency – why investors do not pay more attention to this is mind boggling. Practically all your real returns are absorbed by high fees. Take note that saving an extra 1-2% on fees will have a significant impact on your returns. Set up structures to ensure tax efficiency, and smile when SARS is unable to take your hard earned returns. I believe strongly in legal tax avoidance

3- Stop obsessing about returns. So much energy is spent chasing that mythical 14%, an item we have no control over that we forget more important items. They expensive and volatile Be content with average returns and if you focus on the above 2 points, you come out on top

In a nutshell, focus on what you have complete control over, and let the market do what it does

And finally, avoid financial advisors who will convince you otherwise

Ja, thinking of moving my RA. Currently getting charged 2.5% per contribution. Spoke to a friend yesterday that pays 1.49% per contribution, so that 1.01% will make a massive difference over the long run.

Any advice from anyone that’s done this before?

Currently just finished 5 years (this April) of the 25 years for my RA.

To be financially independant and to be able to pursue one’s ideals is true wealth to me! Just because somebody had decided you are a millionare with R14 million in net assets might make you rich in the eyes of society, but you can still live an intellectual and emotional poor life.

This article is just a load of rubbish with no merit. Showcase for souls to brag about their money. Our Western society is obsessed with things and money. But very poor in morals and values. In our society more is never enough. Somebody said. “Beware of a man who knows the price of everything but the value of nothing” . That applies to our society these days.

A person is wealthy when he appreciates all the stuff that he cannot afford, and poor when he can afford everything but appreciates nothing.


I can believe this. For you sir.

I thought you were going to get on the capitalism busy that take everything is leave nothing. As long as its money hustle. e.g. BAE system and the American Military complex.

In many African countries, poor communities grow food on the land they do not own, build simplistic houses from free material obtained from the land, etc. They are considered poor as many of them do not even have a bank account nor have money to purchase cars or afford expensive holidays. But yet they do not have any debt. If one speeds past their houses, one often see the kids playing & laughing outside, adults have conversations around circles, elders are part of the community and being respected for their wisdom, etc. In western terms I’m considered as rich and financially independent (I’m in my early 40’s, with no debt and close to R14M net worth), but I do envy their life styles more than the one I have ‘deserved’/’slaved for’. They have real wealth and are truly financially independent (money is just simply a means to them).


I’m in a similar position as yourself and have had similar thoughts. My conclusion is that wealth gives you POTENTIALLY more freedom which the poor can never have. If you want to visit New York City next month or take a sabbatical to travel Asia for 6 months, you can do it. That is a reason to have the wealth and work for it. But if you dont have such a reason and simply want to watch tv and chill, it may be better to dial things way back. You cannot take it with you.

so dear AP, if you are debt free and 14M strong, why don’t you join them, stop envying them, please then enlighten me what is stopping you.

It is tempting. Believe me I have considered it. It is taking the risk of entering the unknown. It could be selfish if all impacts on all my dependents are not thought through. However, I do believe one day I will give you feedback of the step taken…

In principle I believe the article to be good and something all of us should aim for. Start with getting rid of debt as fast as possible. Secondly a monthly budget to stick to. Once you keep to a budget and stay within it’s parametres the results will follow.

Is the 300 factor based on an after tax or before tax number?

“…someone who is worth…US$1 million would be considered wealthy in any country”

Err – I doubt that’s true anywhere in the developed world. Try $5m!

That’s an assumption. Developed countries may have better support, but humans are humans…they also don’t save:


Not sure your point? 1/3 Americans certainly would not be considered wealthy

$1m in assets can mean you own a small 3-bed house outright ($500k), a couple of cheap cars ($60k) and have some contributions toward a pension (the rest). That’s still a LONG way from wealthy.

“Many of us are working hard to earn enough money to stay afloat while we try to save every month so that we can be financially free one day.”
9 out of 10 people will never be financially free.actually more than that

End of comments.





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