Financial Freedom Plan and our Net Worth Goal

I recently laid out our rough plan for how we plan to generate income once we become financially free. This plan suggests we'd be able to generate between $40k-$76k+ per year which should cover our annual expenses. Next I want to start to lay out a rough plan for what our balance sheet might look like to support that plan. Thats not to say our balance sheet would need to match this, but merely be a guidepost for what we would want it to look like, all things being equal. Certainly real or perceived opportunities to earn higher rates of return with lower risk would likely trump any balancing of assets among these areas.

Assets Needed for Our Financial Freedom Plan

Projected Income Range Est Assets Needed
Rentals $20,000-$30,000 $ 451,225.00
Stocks $5,000-$6,000 $170,000 - $250,000
Interest $10,000-$20,000+ $200,000 - $400,000
Side Income $5,000-$10,000+ None
Retirement Assets $0-$10,000 $400,000 - $530,000
Primary Home $ 302,000.00
Cash/Emergency Fund $60,000-$100,000
Est Net Worth Needed $1,583,225 - $2,033,225

Note: Retirement assets would likely be additional stocks/bonds or other investments inside our 401ks, IRAs, or other retirement accounts.

What About Our Liabilities?
The assets listed above assume no debt/leverage on our balance sheet. Any debt or leverage we carried once we were financially free would need to be offset by additional assets on our balance sheet.

We currently have $470k of property mortgages on our monthly net worth statement. Assuming we don't eliminate all this debt by the time we become financially free, we a would need to increase the assets listed above to cover this debt. For example if we plan to carry $250k in mortgage debt once we become financially free then I would plan to have at least an additional $250k in assets to offset this debt.

Is this Inline with our Current Net Worth Goal?
These estimates of needed assets turns out to be a little on the low side of our current net worth goal of $2 million + the value of our primary residence, but within the same order of magnitude. Give this is just rough estimating, I think our current financials goals are well inline to support this financial freedom plan.

Related in Financial Goals:

Financial Freedom Plan - 2015 Update (Apr 30, 2015) I finally sat down to get an updated view of our progress towards our financial freedom plan that I laid out a few years go in terms of asset allocation. Some notes: Our asset allocation to fixed income (interest) will...

Financial Freedom Plan (Aug 25, 2013) Almost two years ago I laid out a plan for the net asset allocation I thought we needed for our financial freedom plan. It was a rough guide for asset allocation that I believe could generate enough income to cover...

2012 Passive Income: Dividends (Jan 27, 2013) Here is a summary of our 2012 dividend income. All this income comes from our taxable stock portfolio that is included in our monthly investment review. All retirement investment holdings are excluded from this dividend income summary. This passive income...

Comments (11)

Very impressive! I think you'll do it! Quantifying it just makes it that much more realistic!

Fascinating. I appreciate this approach and think it makes a lot of sense. I will definitely want to be debt free before attempting to retire.

Why do you want to be debt free before you retire? It helps keep your cash flow simple, but are there other reasons?

Looks good. I took the same approach when planning for my own eventual retirement.

There were two main differences.

The first is that I decided to keep at least some debt against my rental properties when i went into retirement. This is largely an exercise in protecting myself against inflation.

I also added another asset category for anticpated one off future expensessuch as redecorating our home, paying for my daughters' weddings etc. I prefer this approach to funding out of general income.


Hi there,

Thanks for open discussion. Could let me know where can I get 5% on my investment as interest?

Why you did not include social security - are you far away from it or just do not want to cunt on it?

I did some calculations on my own and came up with the same figure - about 2 million. But is it actually worth a trouble, if you could make 5%
on your investment as interest 5%?

Are you mortgage free on your prime residence already? Did you try to project it, when you reach your target?

Was hoping someone would respond. I agree completely with you.

5% interest? I think there are several high quality corporate bonds/debt that pay that or more. I've been buying one that yields 7.5%+ in our portfolio.

There are a lot of reasons why you don't see social security here. This is my plan to reach our financial freedom goal hopefully in the next 10+ years - at which point I'd only be 45, so no option for social security for 20yrs+. Plus I think its probably a safe bet that social security may not look like it does today 30yrs from now. Anything we get from social security would be a bonus for us at this point.

For the rentals, you are estimating 4.4-6.6% annual yield. Isn't that quite high?


2million, which corporate bond or bond fund did you buy in your portfolio that pays 7.5%?



My thinking on the rentals is to pay off our existing 3 rentals and count the cash flow after the remaining expenses (taxes, insurance, maintenance) from the properties as income to sustain us.

Steve - look on our monthly investment reports @ MKV for an example. I'm planning on posting more examples in an upcoming post (no promises though)


What exactly are the side incomes? Is that just ad-hoc consultation, or odd jobs?

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A personal finance weblog of my journey to reach my goal of $2 million + the value of my primary residence.
Current Net Worth: $1,938,393


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