A Quick Check on Knowing whether You are on the Way to Get Out of the Rat Race

Do you feel tired on working for others?  Are you having a job that you are not interested in but forced to do so?  Are you thinking of firing your boss but not sure whether you are ready or not?  So, you are thinking of no working while money is still coming, aren't you?


It is true that you can't just simply fire your boss should you yet to have enough financial resources to do so.  You understand that you have to consider a number of factors such as investment return, inflation rate etc to get the exact figure required.  So, how to have a quick check on knowing where are you now?  Very simple.  All you need to do is to:

1. get your essential monthly expenses.  The keyword here is "ESSENTIAL" and it is subjective.  Therefore, you have to define your essential expenses carefully.  As a rule of thumb, essential expenses are those spending that you can't live without.  You can't just plug this figure out of the air.  Yes, it will be much easier for you to get a realistic figure should you have a habit of bookkeeping.  If not, you have to use your imagination but I really doubt about the accuracy.
2. get your average rate of return.  The return could be the interest received from your savings and fixed deposit accounts, dividend from your unit trust and share investment, net rental income received, paper gain etc.  To get the rate, all you need to do is to sum up all these return and divide it by your initial capital of investment.  For example, in a year, you have $10,000 in fixed deposit and receive $300 in interest; you have $10,000 investment in unit trust and received $500 in dividend; you keep $10,000 in cash and receive nothing.  In this example, your rate of return is ($300 + $500 + $0) / ($10,000 + $10,000 + $10,000) = 0.027 (which is 2.7%)
3. get your essential annual expenses by miltiplying your monthly essential expenses by twelve and divide this figure with your average rate of return.  In this illustration, say your monthly essential expenses is $2,000 a month.  This equals to $24,000 a year.  Divide $24,000 by 2.7% and you get $888,888.88. 

In this example, you need to have about nine hundred thousand ready before firing your boss.  Please note that this only provides you a quick check and this figure is yet to consider other factors such as inflation.

Do note that the requirement could reduce if you have sharpen your skill on improving your investment return.  In this example, if you could get your average rate of return at, say, 5%, you only require $480,000 instead of $888,888.88.  Yes, only the marginal 2.3% additional return, your burden reduced by 46%.  Now, the key is how to improve your overall rate of return.  You have to learn.  If possible, find a mentor and be guided.

I hope this post could provide you a ground start on your journey towards your target of worry-free retirement.  If you would like to know more on what should be your target amount for retirement, my book, FREEDOM has all the details.  Happy reading :)