113
What do I mean by financial freedom? Earlier I had a comment made about financial freedom on one of my posts. In it they went on explaining the meaning, to them I take it, of these words. And how they thought I used them wrong. At around the same time, I also read a post by called Is it Possible to Make FU Money in Crypto. In which he talks about what it would mean to him, the concept of FU money. So I thought I would use this post to talk a little about what Financial Freedom means for me.
A lite bit of my history
If you have followed me here you might have caused some of my history in a few posts here and there. But I thought I would share a little bit more here. Mostly because it is needed as background for my reasoning and why I view Financial Freedom the way I do. So it is not that I revel in being the center of attention, in fact, the complete opposite is true.
For the last 15 or so years, the majority of them I have spent living on social welfare. I have had some odd jobs here and there like I spent one year at the Swedish IRS. One year at the local City Planning Offices. Before that, I spent some time at Sverok, the umbrella organization for most game and nerd-related clubs and fraternities in Sweden. And I was a substitute teacher for some time as well. Odd things like that.
All of these were either too short or work that was not granting unemployment benefits. And that meant I had, for the majority of the time, to rely on social welfare. In Sweden, this basically means you will be granted some money to cover your basic minimum standard of living, it is a bit more complicated but for this purpose, it does not matter so I will spare you the boring details. In my case, it is around $900-1000 a month.
The biggest part of this money goes to cover my rent, $400. And then there is around $2-300 in cost of other utility like phone, internet, electricity and such. So that leaves me around $300 for food, clothes and entertainment, and anything else I want to do. So not a life of boundless luxury.
What would Financial Freedom look like for me?
Well to start off what it would mean to be Financially Free for me means one thing, I would have to have enough money to be able to live out my days without having to worry about rent, food, or other basic stuff. This can be achieved in one or two ways, either having a large enough pile to live off of. Or have a smaller pile invested so it pays enough yield to cover these expenses. That would mean no more having to jump through hypocritical hoops all the time.
What type of money are we talking about?
For me to be financially free I would have to have enough money that I would be able to get a monthly yield of at least $1000 after taxes. But I would actually need a bit more than that. Either around $300 more per month or ~$40k. This is so I would be able to pay off my student debt. Yes, I have one of those too, like a nice big cherry on top.
But let us try and figure out the rest of it as well. In order to be able to make $12k a year, after-tax. Well in Sweden capital income is taxed with a flat 30% tax, so that makes things easy to count at least. If we could backward we get 12000 divided by 0.7 and that comes out to 17142.8 but we will call it 18k even, just to not make things harder on us.
Checking stakingrewards.com for BUSD. And there I see it is 5.9%. Why BUSD you might ask, well it is a stable coin that is not algorithmic, meaning it is backed by 1 to 1 in USD. At least as far as I know. This also means I do not have to think about any price fluctuations. Well other than the USD vs the SEK.
And just to give us some room for change we will use 5% as our APR. This would mean that we would need a total of 18000 divided by 0.05, and this comes to 360 000. With the 40k in student debt, it makes the total 400k. At the current moment, the SEK is at about 1 to 10 with the dollar. Meaning the Swedish Krown is pretty weak compared to the dollar. In this case, is actually good for me. But this is, and probably will not always be the case. so in order to not shot myself in the foot, I probably need to adjust a but here as well.
A more realistic number would probably be 1 to 7. That would mean I would need to increase the 360k by 30%, 360000 times 1.3 this then comes out to 468k. And adding on the student debt of 40k will put it in the 500k ballpark. And it would probably be more beneficial to slowly pay off my student debt rather than pay it all off in one go. Because then the majority of the 40k could be used for increasing the total amount.
There is however one last hurdle to jump through. And that is the IRS hurdle. Gur, but you already accounted for the IRS you say. Well yes, on the monthly payments. But not on the 500k. While most of that money can be accrued "in the dark" I am totally against not paying my due. That means that in order for me to be able to do that properly. I would be taxed on this amount when I bring it forth.
And here it might become a bit boring for you so I will just go through this fast, as it is more Swedish tax law. Crypto is treated as stocks in Sweden. This means I can make a general deduction of 30% of the selling amount that I can count as the purchase value. So I would only have to pay tax on the remaining 70%, and the tax would be the same 30% as before. It comes out to 625k.
So in order for me to reach my foal of Financial Freedom, I would need to accrue 625k "in darkness". s been a pretty fun trip, while I previously had not done the hard match to this extent. I had been going off the 400k as a base number. But now I have a more accurate number to strive for. And that magic number for me is $625,000.
Sure this number would not have me live in a heap of luxury, but it would mean that I can live in about the same standard as I now have. But it is still good to have an actual target for me to aim for.
I hope that all this math has not been all too boring for you. And that you instead found it an interesting exercise and something you then can take and use to try and figure out your own magic number to target. You might have done this sort of math exercise already. If so would you be willing to share your magic number in the comment section down below? Have I made any glaring errors or overlooked some things?
If you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead. You can find my other posts
You can catch the sixth and previous step here:
Why I started writing at PUBLISH0X - My Journey to Financial Freedom
See you on the interwebs!
