Random musings: Will you be part of the 5%?

During last night's free training in the "She's Creating an Empire" Facebook group, this statistic was brought up. Basically, 90% of the population will be dead or dead broke by the age of 65! I've heard it before but since 4 weeks from tomorrow is my 65th birthday it really struck home:

But unless something drastic happens I won't be in the last two categories! I will still be working, but I'm planning on being done with that in the next two years (or less!).

But what about the other two categories? I think the best definition of financial independence is this one from Robert Kiyosaki: "Stop working and when your money runs out. that's how financially free you were"

From a blog post I wrote on the subject:

In other words, if your passive income exceeds your monthly expenses then you're financially free because you won't have to work anymore. How much are your monthly bills? Then you need that much in passive income. You don't need millions of dollars in income to be free. In fact, many people have millions of dollars in income, but it's not passive, so they're not financially free.

A third of Americans are one paycheck away from being homeless; so, many of us have a week or two of financial independence.

How much will you need to live on? According to conventional wisdom, you'll need 80% of your pre-retirement income to live on. And Social Security will provide approximately half of that. Where will the other half come from?

Here's an example, using a couple of rules of thumb that I've come across. We'll use an hourly wage of $18 which is certainly doable where I live...the minimum wage is $14 per hour and the median is $24.

The first rule of thumb is to multiply the hourly wage by 2,000 to get the annual wage (40 hours times 50 weeks...it's pretty close), so that comes out to $36,000 per year or $3,000 per month. Eighty percent of that is $2,400 and SS should provide about $1,200 of that (depending on how much you've made during your highest paid 35 years). The other rule of thumb is the Rule of 200...multiply your monthly income by 200 to find out how much money you'll need in savings and/or your 401k earning 6% interest to be able to live off the interest, which comes out to $240,000 (1,200 times 200). If you have $240,000 put away, you should be financially independent. But what if you don't have that much? The median 401k balance in the U.S. is $25,775 according to Business Insider, which is only 10% of what you'll need! Then you'll need $1,200 of passive income from rents, royalties, annuities or a business like a network marketing business.

What about being wealthy? Here's a great definition by Tony Robbins (also from the same blog post):

How do I plan on going from where I am to becoming wealthy in 2 years? By taking advantage of the financial education provided by "She's Creating an Empire". I invite you to join me.