How much money do you really need for financial freedom?

Financial freedom is one of the most sought-after goals today, but it remains shrouded in an aura of mystery. Many people ask themselves: how much do I really need to earn to stop worrying about money? The answer isn’t straightforward, and this is precisely the important starting point. Financial freedom is not a fixed milestone but rather a dynamic state that depends on three main factors: income, expenses, and how you allocate your assets.

The First Factor: Your Lifestyle Defines the Goal

Let’s consider two completely different scenarios. Imagine wanting a minimalist life: you’d only cover basic costs like food, housing, and daily expenses. In this case, even 1-2 million in savings might suffice, gradually withdrawn and invested in stable-yield investments. This is minimal freedom.

Now, think of the opposite scenario: you want to travel to the four corners of the world, stay in luxury accommodations, drive premium cars, and indulge in luxury shopping. Suddenly, you’ll need tens of millions in assets to maintain this lifestyle.

Consider Marco, who earned €15,000 a month and accumulated €3 million in savings. He decided to leave his job with the goal of living off financial freedom, but discovered that his annual expenses totaled €100,000. With occasional trips, dining out, and new purchases, his money quickly ran out. He tried investing but, without experience, lost half of his savings. In less than five years, he was forced to find a new job.

Conversely, a colleague with a similar salary took a different approach. While continuing to work, he developed a side business and diversified investments in funds and real estate. At age 35, his passive income had steadily reached €500,000 annually, fully covering his living costs. Even without working, his wealth continued to grow: this is true financial freedom.

The FIRE Formula: How to Calculate Your Magic Number

There is a global movement addressing this issue: it’s called FIRE, an acronym for “Financial Independence, Retire Early.” The formula is elegantly simple:

Save enough to have 25 times your annual expenses, then let this money generate a 4% annual return.

Necessary assets = Annual expenses × 25

What does “4%” mean? It’s based on historical studies showing that a diversified investment portfolio can generate about 4% annual return while maintaining long-term growth, thus protecting capital from inflation.

Here are two practical examples:

If your annual expenses are €100,000, you need to accumulate €2,500,000, from which you withdraw 4% (€100,000) each year to cover your costs. If you want to spend €500,000 annually, you’ll need a net worth of €12,500,000.

Of course, this is an approximate estimate. The exact amount must consider inflation, market fluctuations, your personal investment capacity, and other contingent factors.

Active Income vs. Passive Income: Which Will Get You to Freedom Faster?

Elon Musk said something fascinating: “If you earn while you sleep, you’re truly free.” This perfectly summarizes the difference between two strategies.

Consider property owners who have purchased multiple units: they earn €200,000 a year in rent, while their living expenses are only €150,000. Without working a single day, their wealth steadily grows each year.

If you only earn €20,000 a month and your savings grow slowly, reaching freedom based solely on your salary is almost impossible. True wealth accumulation doesn’t come from earned income but from asset appreciation.

The three levers to accelerate toward financial freedom are:

Increase active income: develop your professional skills, create side businesses, start a company. Especially in high-leverage sectors like internet, consulting, and content creation, you can achieve salary growth significantly faster than in traditional sectors.

Create passive income: invest in real estate, stocks, funds, business stakes. Let your money work for you 24/7.

Reduce irrational expenses: plan your spending consciously, avoid compulsive consumerism, and lighten the burden of credit card debts and loans.

Speed Matters More Than Quantity: Why How You Earn Is Decisive

Suppose your goal is to accumulate €10 million in assets for financial freedom. Someone saving €100,000 a year would take 100 years. Another, investing in entrepreneurial ventures and diversifying their portfolio, manages to increase their net worth by €1 million annually and reaches the goal in 10 years.

The speed at which you achieve financial freedom is directly proportional to your earning method.

If you want to accelerate the process, here are the crucial elements:

(1) Diversify your income sources: don’t rely solely on a salary. Develop skills you can monetize in parallel, whether you’re an employee or an entrepreneur.

(2) Learn to make money work for you: relying only on savings is extremely slow. Study investment tools: index funds, quality assets, real estate diversification.

(3) Manage debts: debt is the silent enemy of wealth. Prioritize reducing high-interest debts.

(4) Experiment with different earning models: discover what works for you. Some build wealth through entrepreneurship, others through investments. There is no single universal path.

Two Types of Financial Freedom: Which Do You Choose?

Here’s the crucial point many overlook. What most people seek is actually the “poverty freedom”: living with low consumption, low standards of living, relying on accumulated savings and conservative investments. This requires €200,000-€500,000 in savings to fully relax.

But there is another version: the “wealthy freedom,” which is not only based on savings but on continuous earnings and investments that allow wealth to grow constantly. It’s not just the right to consume freely but the right to choose your life’s direction freely.

If your only goal is “not working,” then achieving financial freedom is relatively easier. But if you desire true freedom—being able to do what you love, choosing your path independently—you must continually elevate your earning capacity. You can’t rely solely on static savings.

In the end, true financial freedom is not just economic freedom. It’s having more choices: the power to decide how to spend your time, with whom, and toward what goal, instead of being forced to sell your hours to survive.