The Path to Financial Freedom

Happy Monday, wealthy people! 

Two years ago, when I decided to leave New York City after fifteen long years in Finance, I had a significant life choice to make:

1) I could retire somewhere in Southern Europe for the rest of my life, or

2) I could come to Stockholm where at some point I would need to work for a living if I wanted to maintain a certain lifestyle.

The choice to come to Stockholm was clear back then, and still is the best decision I have made for my family. I tell you this story because there’s a lot of talk online about Financial Freedom. As I shared in my presentation last week at the Limitless Community event, Financial Freedom is something unique to YOU.

In its most basic form, it means that you never have to work again and can live off of your money in perpetuity. In other words, you would join the so-called FIRE movement: Financial Independence/ Retire Early.

For me, it wasn’t a priority.

Is it for you?

Read more to find out how to get there.

In today’s email:

👉 Stock Market Update 

👉 Wealth Building Strategies - The Path to Financial Freedom

👉 Ask Me Anything - Should I pay down my debt or invest?

👉 Sip of Learning - What’s a stop-loss order?

Grab your latte and let’s get started!

Margarita T., CFA

Founder, Finance Latte

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How much money do you need to retire?

👉 When evaluating a traditional retirement (that is, retiring at 65 years old), a key concept to explore is the Safe Withdrawal Rate.

👉 Whether you divide your annual expenses by 0.04 or multiply them by 25, the outcome is the same (I see the math geeks like me nodding 😀).

👉 The lower your annual expenses, the lower the amount you’ll need. Where you plan on retiring and what lifestyle you are going to choose are two of the most important factors in the formula.

But this 4% formula has many assumptions and limitations:

Key Assumptions:

  • 30-Year Lifespan

  • 50-50% Stock/ Bond Portfolio

Watch for:

🚨 Women’s Longevity

👉 Women live ~6 years longer than men. This means, you’ll likely need to plan to have more money at retirement and likely have more in stocks (i.e., take more risk) earlier in your life before you reach retirement.

🚨 Retiring Before 65.

👉 The 4% Safe Withdrawal Rate assumes you retire at 65 (thus the 30 years lifespan). For retirements before 65, you would need a lower rate than 4%. (Thus, more money to reach early retirement).

There are a lot more considerations that one must make, such as, your loan situation, your dependents, your flexibility in reducing your spending, etc. Thus, this is general information and not tailored financial advice.

Alright, we need 25x our capital. How quickly can I get there with long-term investing? 🏃🏿‍♀️

☀️ Let’s pretend you need to spend $40,000 a year when retired in a warm and sunny destination.

To retire at 65 years old, you would need $40,000 × 25 (based on the Safe Withdrawal Rate above). That is, you would need to invest $40,000 today and wait until you reached an 25X return, which is $1,000,000.

How long would it take to get 25X? If you only invest once, today, $40,000, then assuming an 8%* investment return (not guaranteed) that would take 41 years!

Hypothetical Analysis. Returns not guaranteed. Investing involves risk, including loss of principal. Not financial advice.

What if you earned a higher return than the 8%? How long would THAT take to get to 25x?

Hypothetical Analysis. Returns not guaranteed. Investing involves risk, including loss of principal. Not financial advice.

🤔 Even at a 10% rate of return, that still gets you to 25X after 33 years!

🚨 So… am I telling you that you can’t retire early? Of course not!

What I’m showing you here is that it’s a lot more difficult to get to financial freedom if you ONLY invest once. (Unless you have an enormous amount upfront, which most people don’t.)

The easier way is to save and invest an amount monthly. (Even better if it’s set to be done automatically.)

Assumes an 8%* return (not guaranteed). Does not take into trading fees or taxes. Not financial advice.

The longer your time horizon, the lower the amount you need to save/investing each month to get to $1,000,000.

For example, if you only want to wait 10 years to retire with $1,000,000, you would need to invest $5,600/ month for those 10 years to potentially get you to a balance above $1,000,000. (Assumes 8% return).

If you could wait 20 years? You would need only to invest $1,750/ month for 20 years to get to $1,000,000.

Again, remember that when retiring early and have more than 30 years life span, you would need more than what the Safe Withdrawal Rate suggests.

🧮 Happy Calculating!

*8% return not guaranteed. Over the last 30 years, the global stock markets as measured by the MSCI World Index USD (an index commonly tracked by Global Index Funds) returned a little over 8%. Information provided for educational purposes and should not be considered financial advice. Always consult with your financial advisor for advice specific to your unique needs and circumstances. Past performance does not predict future results. Investing involves risk, including loss of principal.


Question: “Should I pay down my debt or invest?”

– Natalya M.

Answer: “Great question. Here’s how to think about such a decision:

1) The higher the interest rate on your loans, the more you should prioritize paying them off vs. investing. Any loan with interest rates above 8% should be a priority to pay down first.

2) If your loan has a low interest rate, let’s say well below 5%, then one could argue that you can keep the debt and invest any extra money in the global stock markets instead, which historically averaged 8% (not guaranteed, using the MSCI World Index USD). This way, you could have a chance, after-fees and taxes, to make more money by investing vs. paying down your debt.

This approach requires a long investing time horizon (> 7 years) for a higher chance of success in the stock markets.

It all comes down to your tax brackets and your comfort in keeping the debt longer than necessary.

This is a great conversation to have with your financial advisor.”

– Margarita T., CFA

Got a question for me? Ask it by simply responding to this email.


🗞️ Katie Tassin writes another excellent article on the hypocrisy of #Tradwifes. Google this hashtag if you want your jaw to drop. 😳

📚 Cool Dictionary of Blockchain and Internet Terms by VC firm Andreessen Horowitz.

🗞️ Women’s Football Fashion Designer wins NFL licensing deal after viral Taylor Swift outfit.

👩‍🎓 Free Resource: Try our Introduction to Investing digital course.

Finance Latte AB is not a registered investment advisor. This content is for informational purposes only and should not be interpreted as investment or tax advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice. Past performance does not guarantee future results. Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment. From time to time Finance Latte AB might include affiliate links in its newsletter or website where we might earn a commission if you subscribe to a publication, or purchase a product you found through us at no extra cost to you. We will not promote any type of investment product, and will only include non-investment/non-finance services or products we believe in. View our Privacy Policy and Terms of Service.

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