The question I get asked most is "How much money do I need in order to stop working?"

Ever wondered about that?

Stop working.  Freedom to choose how you spend your time.  Where you spend it... with whom you spend it... and IF you choose to work.

The biggest mistake I see people making is NOT KNOWING that number.

WHY?  Well here's the problem...

Your subconscious KNOWS you aren't saving enough... so it becomes an energy drain, an invisible stressor

That's why I believe we should all know

1. How much do you need, in today's money in order to retire? (and do that calculation each year)

2. How much do you need to contribute each month from now on to hit your retirement number?

3. What if you can't contribute that much... how close will any additional contribution you make from now on get you to your goal?

I have a FREE calculator and step-by-step video you can easily download and play with to find out the answers to those questions.

I'm so passionate about it, I went and built the easiest to use little tool and made a video to help anyone be able to use it..

You need to know four pieces of information

1. How Long - until you want to stop working, and then how long will you be retired for

2. How much will your investments grow - here I give you a guide to assume, because most of us have no clue (but you can look at your actual rolling 3-5 year growth)

3. How much will you need each month - when you stop working

4. How much are you currently investing per month, and the balance of your investments

Show notes:

• [] Financial Freedom is the ability to choose

• [] The 4 numbers you need to know

• [] How long

• [] Investment Growth

• [] How much will you need

• [] Current Investing

Quotes

"True Financial Freedom is when your investments generate enough money while you sleep to replace your income. That's when you get to stop work… because your money is making money for you instead of you doing it" Lisa Linfield

"The problem is most of us have NO idea what we need to have in order to reach financial freedom.
For most of us, there's this sinking feeling that we don't have enough… and we know in our sould we need to invest more… but we don't know how much." Lisa Linfield

"When are you mentally calculating that you'll REALLY start saving for retirement… you may be doing a little, but when will the real saving start? After kids? And how many years does that give you before you need to start paying for a 30 year retirement?." - Lisa Linfield

"National Treasury says 94% of us will NOT have enough money to live at the same standard of living we currently enjoy." - Lisa Linfield

"When you KNOW the impact investing a little more each month will have, then it makes it so much more Worth It to do." - Lisa Linfield

"KNOW how much you can afford to live on and how much you'll have to retire… then start cutting expenses and use that to invest more." - Lisa Linfield

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TRANSCRIPT

Ever wondered how much you will need to be able to stop working? To have the ability to choose how you spend your time, choose where you want to be (the beach or the city), and even, have the ability to choose IF you want to work, and choose only the clients and colleagues you like working with?

What is Financial Freedom?

True Financial Freedom is when your investments generate enough money while you sleep to replace your income.

That's when you get to stop work… because your money is making money for you instead of you doing it

So what's the problem?

The problem is most of us have NO idea what we need to have in order to reach financial freedom.

For most of us, there's this sinking feeling that we don't have enough… and we know in our sould we need to invest more… but we don't know how much.

I recently met with a client who has a good job, is very frugal with her money, but was terrified she was going to have to work forever to pay for her retirement…. When I went through the numbers it turned out not only would she have enough, she could actually choose to retire NOW and could have done so a few years ago.

Do you KNOW how much you need in order to retire?

There are four numbers you need to know...

There are 4 numbers you need to know in order to work out how much you need…

1. Number of Years

2. Investment Growth

3. How much you want to spend when you're retired

4. Your investments you have and contributions you are making

Number of Years

3 elements here

1. How many years you have until you draw your money down? This is the time the existing investments have to grow

2. How many years of contributions have you got left? - you may for example stop big contributions when you're 60... but only draw your investments from 65 because you will have consulting work for 5 years... or the other way round... you may have to spend all your money now whilst you're educating clients... but then you may have 8 years at the end between when your kids finish school and you retire when you plan to max investing.

3. How many years you need to live off that money?

I was coaching a client recently who had almost no money saved for retirement - she was nearly 50, and all her money had gone to her kids…. Trying to give them the best life possible.

When are you planning to save for your retirement?

My kids will be finished university by the time I'm 55 and then all my money will go to investing for retirement

At 55, she will have 8 years to her retirement at 63. As financial adviser's, we work on a lifespan to 95 - which means she has 8 years to save for 32 years...

If you take just normal, plain, maths... if she saved 100% of her money over the 8 years, living off nothing, 8 years saved will mean 8 years to spend...

So the amount of years you have to contribute is hugely important.

I had another client who came to me at 60 who had nothing saved. When I asked him why, he said that no one in his family had lived longer than 58, so he always assumed that he would have a heart attack like them, and die. So he wouldn't need to save. He's 63 now, has had a heart attack, but hasn't died. But has no money to retire. He fortunately is a dentist so can keep working, but it's really dangerous to say "I'll only live to 75"... because if you don't die, you are going to have a challenge

So when are you mentally calculating that you'll REALLY start saving for retirement… you may be doing a little, but when will the real saving start? After kids? And how many saving years does that give you before you need to start paying for a 30 year retirement?

So the rebuttal most of you would make - and my coaching client did - is what about point 2, investment growth…. Surely it will just grow to cover the shortfall?

Investment Growth

People think investments can grow you out of any challenging time… and they can - IF you have time. That lovely compound growth curve needs TIME. But, let's look at investment growth

1. IF anyone is offering you growth per year consistently above 20% per year on a publically available investment... do a lot of work to validate it.

2. It doesn't mean that there aren't year's when things perform well. One of my funds did 31% growth last year 2021. But in 2018 it did 4%, and in 2019 and 20 it did 10%. and in 2022 it's - 3%.

3. You need to think of growth in terms of inflation. Your investments need to grow by 2-5% above inflation over a period of 3-5 years.

I inherited a client in their late 70s who had R1.2m and were drawing R300k per year. IF you're in the US, think of it like having $120k and they're drawing $30k per year.

Not living extravagently… but the problem is they don't have enough.

When I asked them how long they thought it would last, they said 10-15 years.

So I took them through the maths... R300k x 4 is R1.2m. So they would have just over 4 years with some growth

They were shocked... and heartbroken... which surprised me given it wasn't difficult maths that. And when I asked them why they thought 10-15 years, they said "but it should grow".

There's investment growth, and then there's gambling or get rich quick.

90% of your portfolio should be in solid, proven growth, 5% in long term themes and you can put 5% in punts, like crypto currencies etc

So what are your assumptions about growth? Are you relying on a get rich quick kinda growth?

In my "How much is enough" sheet, I take you through industry assumptions for growth - and you can modify that to take into consideration your ACTUAL growth you're getting on your portfolio. Remember to think of it in terms of "Inflation +" growth… you can download that sheet at LisaLinfield.com/HowMuch

So that brings us to the biggest thing you can control, which is how much you spend… and the question of how much will you need once you've stopped work?

How much do you want to spend when you're retired?

National Treasury says 94% of us will NOT have enough money to live at the same standard of living we currently enjoy.

So what do you do if you know deep in your tummy that you won't have enough saved by when you need to retire?

>>> Think of it as the reverse crocodile or a more than sign… right now you may have the years left to retirement to both raise your income (by getting increases or starting a side hustle) and drop your expenses...

Because in reality, if you don't have enough, at some stage it's going to run out... so you have three options

1. Gradually shift life from now on - if nothing changes, nothing changes. This option allows you to freeze your expenses, allowing yourself no salary increase, but then forcing yourself to cut your living by at least inflation... and investing all your salary increase - or most of it. It's called Save for Tomorrow, Tomorrow - Listen to the podcast here

2. Suddenly drop expenses when you retire - to a level that you can live off in retirement - which is a hard call because there is so much adjustment that you make when you retire, this adds huge constraint on top of it

3. Hope you die early - the challenge with this is that if you don't, you then need to rely on children… where they get to call the shots about what you can and can't do, handing you pocket money.

That's why it's so important you KNOW how much you can afford to live on and how much you'll have to retire… and then start cutting expenses from now on until your current expenses match your future investment income.

Which brings us to the final thing - your investments.

Investments - How much do you have, and how much will you be contributing in the future?

When you KNOW what the impact of investing a little more each month will have, then it makes it so much more Worth it to do…And that's where it's good to have a little spreadsheet to play around and see what small amounts of R100 ($10) or R500 ($50) can make on how much you will have when you retire.

Three tools for being able to put that extra little bit into an automated monthly payment:

1. Save for Tomorrow, Tomorrow…Listen to the podcast here

2. Freeze your expenses… - If your Inflation rate is 6%, you effectively halve your costs over 12 years… and you then take all the salary increases, and you save them.

3. Reduce the need... You get a double whammy by doing number two - for every little bit of money you invest... 1. it's growing and 2. it's money you don't have to spend later on dropping the need for retirement... so it lowers your target!

I had a client who at 47 was very far short of her target. So she did exactly what I recommended, and RADICALLY reduced her expenses over 3 years and ended up saving 45% of her salary by expense cutting and saving 3 years of salary increases.

Then Corona hit.

And as a business owner she had to take a 50% drop in salary.

Which she was able to do because she lived off just 55%. She'd made all the big changes needed to over 3 years to sustain a smaller life. And was able to find the extra 5%. Which when her salary restored to pre-Corona levels, she never went back to using that money.

But start small... Could you increase your savings by R300 ($30) per month?

Do it... and set up an automated payment to your investment company today.

It all starts with KNOWING… Download my sheet…

1. Know how much you need

2. Know what the impact is of saving more