Financial independence calculator and what to consider (with case study)

Unfortunately, no financial independence calculator can give you a really specific number because there are several factors to consider and life is not static.

However, you can get a rough calculation that will change over time 🙂


 My very short answer…

How to calculate your financial independence number:

Your annually financially independent budget multiplied by 25

This “How to calculate my number” question is actually essential and the answer above is a standard response if you search for it online. It may not suit your situation.

Personally, I go for approximately 5% rate which means I multiply by 17

The numbers are very individually depending on your vision, timeframe, income, expenses and how your life develops.

In this blog post, I will share my considerations and it’s your job to answer the question for yourself…

“It is the set of the sails, not the direction of the wind that determines which way we will go.”
– Jim Rohn, American entrepreneur

Your financial independence number gives you the direction 😉

Financial independence calculator

If you do not want a greater understanding of your personal calculation, I would suggest the following financial independence calculator online.

➡ Networthify

It is the best calculator to fit the 4% rule.

My financial independence definition



In my definition, you must be able to live off your investments and realize your vision (dream) at the same time in order to be financially independent.

That means your monthly budget is covered totally and you can choose how you want to live your life. No need for any other income and your investments will provide enough in return.

3 things you should do

It’s impossible to predict the future of your economic situation, external factors or how your investments will develop over time.

Instead, you should periodically:


  1. Take some precautions based on the investment trends and knowledge about the past.
    (inflation, investing, wage increases, etc.)
  2. Understand and adjust your present situation.
    (new job, children, disease, habits, etc.)
  3. Figure out how much money you need to live out your vision.
    (what you aim to achieve)

I will mostly cover 1 and 3 in this post.

Financially independent budget


It’s a good idea to calculate and estimate how much money you need every month in your budget when you are financially independent.

Perhaps you would like to travel more, move abroad or plan to have children in the coming years. These considerations must be included so that you are more accurate in your calculations.

I suggest that you are a bit conservative.

Personally, I didn’t look at the small details because they are very unsure when I’m financially free.

When I did my financially independent budget I tried to cover the expected (estimated) expenses on:

  • Household Bills (water, heat, electricity, and taxes)
  • Food, restaurants, and cafes
  • Gifts and donations
  • Renovations and decorations of our home
  • Travel
  • Transportation
  • Insurances and Healthcare
  • Clothes and Care products
  • Fitness, Toys, and Hobbies
  • Internet and phones
  • Savings

In my calculations, I consider us totally debt-free (also mortgage).

We plan to have no insurances and health care expenses because we are lucky to have free access to it here in Denmark. Furthermore, if we moved abroad then we would establish a family healthcare fund.

Our transportation expenses will also decrease a lot and cycling and walking will be preferred.

We may not want to stay in our current apartment because we would love to have a garden and we still don’t have any kids 😊

However, we have no plans to increase our expenses (the ratio) in relation to our total income. We still want to have an entrepreneurial income later on but we do not include it in our financially independent budget.

Inflation must be included



Inflation is a continuous general increase in the prices of goods and services

It’s on average about 3% yearly in our country Denmark.

You can look up the inflation in your country at The World Bank.

It’s important to know the inflation because you have to deduct it from your return on investments (ROI).

It’s the real increase in the value since everything keeps rising.

If you, for example, have a 10% annual return then you must withdraw the inflation. It leaves you with a 7% value increase.

Keep in mind that your investments will also decrease in value because of inflation.

Furthermore, you also need to adjust the budget with the estimated inflation.


I plan to become financially independent within 10 years and below you can see how prices increase on average.

Average increased prices:

(estimated in Danish kr.)

2018: 100 kr.
2019: 103 kr.
2020: 106,9 kr.
2021: 109,27 kr.
2022: 112,55 kr.
2023: 115,92 kr.
2024: 119,40 kr.
2025: 122,98 kr.
2026: 126,67 kr.
2027: 130,47 kr.
2028: 134,39 kr.
2029: 138,42 kr.
2030: 142,57 kr.


My estimated budget will on average increase by 42%.

Your income will usually also increase during this period. The amount of money you invest should also increase in order not to lose value.

It’s very important to keep track of inflation continuously and adjust your financially independent budget.

The Safe Withdrawal Rate (Case study)


It’s a very common rule to withdrawal 4% each year
when you’re going to retire or reach financial freedom.

The reason is that it’s considered a very safe withdrawal rate and it will maintain the value growth of your investments.

The 4% rule comes from a case study that covered stock and bond returns in the period from 1926 to 1976.

Financial advisor William Bengen concluded that with a 4 percent annual withdrawal rate your investment is secured for more than 33 years.

Later on, he changed the withdrawal rate to 4.5%.

William Bengen did a Reddit “Ask Me Anything” interview and it contains some great questions. I strongly recommend that you read it.

If you have not noticed it then:

4% is the same as your annually financially independent budget multiplied by 25

This is the “How much money” number you need to become financially independent if you want to withdrawal 4%.

5% withdrawal rate

Personally, I go for a 5% rate because I will also get a pension when I reach age 70 and I also expect to have income streams later on (besides investments).

I didn’t add my state pension to my financial independence calculation because the pension is controlled by our government and they are able to change it regularly. I want to have full control over my own path.

Furthermore, another good thing here in Denmark is that we also have free access to healthcare and education. It certainly ensures a good foundation for us in the future with fewer worries. 

Final words 


There is a lot of learning and information in this process so I would recommend that you take notes.

Personally, I write down value knowledge that I come across in my personal journal.

Everything you learn about this topic (investing and how to become financially independent) is very valuable information.

Sometimes I just leave it in my journal for later and sometimes I take action to include it in my journey immediately. 


It’s important to write down as you will forget about it over time

Your journal makes it easy for you to study topics and repeat learning of valuable knowledge when you read it again 🙂

Financial independence calculator questions (FAQ)

What’s the average inflation in the world?

In 2017, the inflation rate worldwide amounted to approximately 3.15 percent compared to the previous year. You can read more at

What were the average returns in the stock market?

The major indexes have generated annualized total returns of 9%-10%. 

What if my investments don’t provide enough in return?

When you use a financial independence calculator it’s a rough number. It may take more time than you expected to have enough in returns. Maybe you must adjust your time horizon.

The good thing is your investments are long-term. Trust yourself even if it’s a bear market. 

Eventually, you will reach the finish line. Also, remember to diversify your portfolio to minimize risks of lower returns.

How can I afford to save so much money like 50% or more?

It takes a long time to change habits and a lifestyle. You maybe feel that it’s unrealistic at the moment. I will recommend you to read the blog post about
the financially independent mindset. You really need to take a lot of small steps to finally make it happen. 

Start out by learning more about financial independence, frugality, personal development, and investment. If anybody (like me) can do it so can you!

You must learn to save first and spend afterwards.
– John Poole

How much money will it cost to have a kid?

There is no correct answer to this because we are all different. However, I would like to encourage you to learn your kids about money, frugality, and gratitude on a daily basis. 

What you bring into their lives will be the basis for their development of habits and thoughts.

Can I trust the financial independence calculator online?

As I have mentioned is your number very individually. It really depends on your vision, timeframe, income, expenses and how your life develops. 

I personally make the calculations myself.


That’s it. I am writing continuously while I’m through the process myself. I therefore only write what has worked for me. 

The next blog post is about setting goals.

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Peter Michael

I'm an investor and the blogger behind My Investment Blog. I write about investment, financial independence, personal finance, and personal development. I try to combine the topics and show my journey towards financial freedom.

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