$6M Financial Independence Formula

A breakdown of how to calculate your "freedom number" - the amount needed where your money works for you instead of you working for money.

The Target Number: $6 Million

• Based on working backwards from monthly expenses
• Monthly burn rate: $20,000
• Annual expenses: $240,000
• Goal: Generate enough passive income to cover lifestyle without working

The Calculation Logic

• Start with annual expenses ($240,000)
• Assume 4-5% annual return on investments
• Account for lifestyle inflation
  • Expenses likely to increase over time
  • Hard to give up services/lifestyle once established
  • Don't plan to downsize, plan for growth

Investment Strategy

• Conservative return target of 4-5% annually
• Don't need "home run" investments
• Just steady market returns
• $6M invested should yield enough to cover annual lifestyle costs

Key Considerations

• Number must be post-tax
• Everyone's number will be different based on:
  • Desired lifestyle
  • Monthly expenses
  • Location (Bay Area in this case)
• Goal is to have investments generate enough passive income to replace active income
• Freedom means not having to think about costs of daily luxuries ("guac life")

This framework provides a way to calculate your personal financial independence number by working backwards from your desired lifestyle costs.