Why everyone should have a freedom number and 3 strategies to achieve it

Most people I know like the idea of achieving financial freedom, but their actions don’t reflect this. Mine included, until recently.

The early days of building my accounting firm, Bean Ninjas, were a grind. Long hours, low pay, no holidays, and stress that would occasionally wake me up in the middle of the night.

Three years in and things had turned around. I was able to pay myself a market wage, reduce my work hours and take a few months away from the business when my daughter was born.

I thought I was working towards 'financial freedom', but I didn't have a clear plan to get there outside of growing my business. Here are three strategies that got me back on track and could help you too.

#1 - Define what financial freedom means to you

I love working, so I'm not intending to retire. What is important to me is having control over my life.

My definition of financial freedom is having the ability to choose where I live, what I work on and when I work without needing to consider the financial impact.

Everyone's definition of financial freedom is different, so think about what is important to you.

#2 - Calculating your freedom number

The Financial Independence Retire Early (FIRE) crowd has a principle called the 4% rule.

You can draw down 4% of your invested amount each year without impacting the principle, meaning you can continue on indefinitely.

The 4% rule: If you have $1M conservatively invested you can take out 4% or $40,000 per year.

You can use this principle to calculate your 'freedom number'. So if you want $120,000 per year then you would need $3M invested.

#3 - Track progress with a ‘net worth’ spreadsheet

I update my 'net worth' spreadsheet every month to reflect additional savings and investments. This keeps me motivated and can quickly show if I'm off track and need to adjust course.

Having a 'north star' for my personal finances has shaped a number of key decisions in my life over the last few years.