How do you know when you achieved financial freedom?
Achieving financial freedom can feel like a moving goal post. But through trial and error, I’m living proof that financial freedom is within reach regardless of past financial mistakes. It just took the tiniest of tiniest baby steps to start seeing improvements in my net worth.
If you are trying to achieve financial independence and early retirement, knowing your net worth matters. Here’s why...
According to financial advisory firm Personal Capital, the median US household net worth is not sufficient for most investors to realize a comfortable retirement.
Net worth peaks at retirement age for those 65 years and up. House and property values may account for the majority of the net worth calculation.
For younger age brackets, net worth is impacted by holding significant debt such as a mortgage and student loans.
In addition, the younger generations typically have lower salaries and less assets. But over time, these investments may result in higher net worth households.
Net worth = Assets - Liabilities
Let’s make sure we’re on the same page. Your net worth is every significant thing you own (assets) minus what you owe (your debts and other liabilities).
Assets includes cash, investments such as IRAs, 401k accounts, bonds, and stocks. This also includes your home and other valuables such as your car.
Liabilities include what you may owe on your assets and other debts, such as a mortgage, car and student loans. If you have any credit card debt, that number also falls under liabilities.
Simply put, net worth illustrates the amount in cash you would have left over after selling all of your assets to pay your liabilities. This figure provides a measure of your overall financial health and stability. Your net worth can either be negative or positive.
My journey to financial freedom..
For me, my goal was to create steady income streams to cover my monthly expenses in addition to having a 6-9 month emergency savings fund.
Here are some helpful resources I used to get to know my financial status and stay on track:
1. Early retirement calculator
Can I retire yet? I asked this question many many times throughout my corporate life. In order to know if I was even remotely close to financial independence, I played around with different early retirement calculators.
Of all the different calculators out there, Personal Capital offers one of the most in-depth retirement planning calculators. And it’s free to use!
Know exactly where you stand relative to your retirement goals.
2. Investment strategy
Need support with investing? I hear ya. Determining your asset allocation and constructing your portfolio can be overwhelming.
The advisors at Personal Capital provide a range of financial planning support. This even includes home financing, retirement planning, and stock options.
We all may have similar goals for financial freedom but everyone’s financial situation is different.
For a significantly less cost than traditional financial advisors, you can receive a customized strategy just for your specific situation here!
3. Track your net worth
As mentioned throughout this site, having multiple investments and income streams is important to achieve financial freedom. But keeping track can be a major pain.
I can barely remember my passwords to my social media accounts let alone all the other online accounts I have.
Through Personal Capital, you can also securely link all your financial accounts to get a complete picture of your net worth.
Over time, you’ll see if your net worth is trending positively. Then, take steps to make adjustments in your spending and savings habits.
About 1 million people use the Personal Capital app to track and manage their net worth. Ready to face the numbers?
Financial independence retire early (FIRE) like a boss!
Get FIRE’d up about financial freedom.
There are a endless ways to create side hustle income and reach FIRE. Investing in stocks, owning rental property, creating your own online biz, and so forth.
But it doesn’t mean you need to do it all. Just pick 1 or 2 that gets you excited.
Everyone's financial situation and personal interests is unique. It’s important to try out different side hustles to see what works best for you.
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