When To Quit Your Job | 3 STEP METHOD To Figure Out How Much Money You Need To Stop Working For Good

In this video, I'll show you how to figure out exactly how much money you will need before you can stop working for good - and when you've found out your magic number, you'll know exactly how much time it's going to take before you can quit your job!!

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Here's how you can find out how much money you're going to need before you can quit your job and never have to work another day again!

STEP 1 - FIGURE OUT HOW TO STRUCTURE YOUR FINANCES WHEN YOU'RE NO LONGER WORKING

There are generally two ways of looking at this:

The first is to save up a lump sum of money that you can use to pay for all of your living costs and other expenses, and the value of those savings will be gradually reduced over time as you take more and more money out of the capital pool to fund your lifestyle.

The second is to save up a nest egg which, when invested, will be large enough to generate an annual return for you that will cover all of your expenses without you needing to dip into the capital value of your investments. 

STEP 2 - FIGURE OUT WHAT YOUR ANNUAL EXPENSES ARE GOING TO BE

This is going to help you to see how much income you are going to need to generate each year.

The best place to start is with your current monthly expenses as this will give you a good idea of how much money you’re currently spending, however do remember that when you’re no longer working there will likely be some changes to take into consideration.

For example, you might be able to remove expenses such as a mortgage that you plan to have paid off by the time you stop working, or investment contributions that you’ll no longer be making.

If your daily commute to work costs you a lot of money in petrol, parking or train tickets, you can say goodbye to those costs too!

It's also worth adding in any additional costs that you are likely to need when you stop working, for example private medical insurance cover.

Lastly, it's also important to consider that you’re going to have a lot more free time on your hands which is probably going to result in you spending more money on things like travel, eating out, and anything else that you choose to fill your time with.

Do be honest with yourself when you’re calculating these costs so that you can make sure you have an accurate idea of what your expenses are going to look like.

STEP 3 - FIGURE OUT HOW MUCH MONEY THE 2 OPTIONS FROM STEP 1 ARE GOING TO REQUIRE YOU TO SAVE UP BEFORE YOU CAN ESCAPE THE RATE RACE FOR GOOD!

Option 1 - Save up a lump sum of money that's enough to pay for all of your expenses each year for the rest of your life.

This requires a fairly simple calculation, but the one variable that you can never be sure of and is how long you’re going to live for.

The average life expectancy in the is UK is 83.3 years for females and 80.2 years for males, but those are just the averages so you’ll need to decide what number you are going to use when doing your own calculations!

Based on your life expectancy number, all you need to do is work backwards from that age and add in the total annual expenses figure (that you decided on in step 2) for each year.

Do this all the way back to whatever age you are now so that you can see how much money it will take to be able to stop working at every age in the future!

Option 2 - Save up a lump sum of money that's big enough to generate a monthly return for you that will cover all of your expenses without you needing to dip into the capital.

The first thing to do here is divide 100 (which represents 100%) by 7 (which represents the historical 7% annual average stock market return adjusted for inflation). This leaves a figure of 14.29 (when rounded up).

Next, simply multiply your annual expenses figure by that 14.29 in order to arrive at the total lump sum amount that you’re going to need to save up.

For example if your annual expenses are £40,000, then the total amount of money that you would need to have invested at a 7% annual rate of return would be £571,428.57 (40,000 * 14.29 = £571,428.57).

This calculation shows that £40,000 is 7% of £571,428.57, so if you needed to generate £40,000 per year to cover your expenses at an average 7% return, £571,428.57 is how much money you'd need to have invested in order to do that.

So now it's up to you to decide which of these options you want to go with and I'd love to hear your thoughts on that down in the comments!

I really hope you found this video helpful, and if you did please be sure to give it a like and subscribe to the channel for more videos! Thanks so much for watching!!

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Видео When To Quit Your Job | 3 STEP METHOD To Figure Out How Much Money You Need To Stop Working For Good канала Ryan Gibson