Financial Freedom is a huge landmark stop on our destination to a dream life of financial abundance.
So what exactly is Financial Freedom, or Financial Independence ( the two terms are usually used interchangeably)?? It is the point where your income from your Investible Assets is greater than your annual current expenses. At this point, you are free to choose not to work and still maintain your lifestyle from your passive income. The income we need to earn to cover our annual current expenses is called Minimum Passive Income.
Recommended Read: Steps to Financial Freedom
Now we want to calculate our MPI (Minimum Passive Income). It’s basically the lowest amount of money you can live on. The way to calculate it is to fill in your budget here. Your MPI is the amount of income you need to cover all the expenses on your budget. It’s a good idea to be highly prudent and conservative in filling your budget. If you were extravagant, you may need to trim it down to get your MPI. Your MPI (Minimum Passive Income)should cover your Immediate expenses here, your debt payments here, and some optional expenses.
Keeping to one’s budget is much easier when you keep your MPI in view. The light of financial Freedom at the end of the budgeting tunnel makes it a bearable, if not enjoyable experience.
Done? What’s your MPI? Are you comfortable with those expenses? Leave a comment and let me know how you are doing with this. Remember to Design Your Life, Live Your Dreams, Day by Day!