How to Quit Your Job: And NEVER Run Out of Money

Imagine waking up every morning and doing exactly what you want to do. Spending your time the way you want to spend it, doing what you love, and being with the people you want to spend your time with. Maybe that means going to work for the challenge and intellectual stimulation rather than the paycheck, taking on a more creative endeavor, or waking up with your children every morning- nothing on the agenda besides playing and singing wheels on the bus. Dream life. 

Well, it doesn’t HAVE to be a dream. It can be your reality! What does it take to live out this dream? It starts and ends with one thing. Financial freedom. 

What is financial freedom?

Financial freedom means you have enough saved and invested that you no longer have to rely on a paycheck. In order to reach this level of freedom, you need to do 3 things:

1. Build a fully funded emergency fund

2. Pay off all debt

3. Invest your money with focused effort

You can achieve these 3 steps by following Soro’s Money Game Plan which will show you the actual proven step by step method on how to turn it into reality. 

How much money do I need?

It feels like even if you save a lot of money, at some point you will run out, right? You’ll spend it all on living expenses, trips, and life’s curveballs. I mean, only Jeff Bezos or Elon Musk could really quit their jobs and never run out of money. WRONG! You don’t have to be a billionaire, and you don’t have to be at retirement age to consider quitting your job and not running out of money (although, unfortunately, for many retirees this is their number one concern).

Step 1: Figure out your annual expenses

The first step to figuring out how much money you will need and not run out, is how much money you are currently spending, and how much money you will want to spend going forward. There’s no point in retiring or quitting your job if you can only afford to sit on your couch eating rice and beans. We want you to thrive, not just survive!

Let’s say you need $60,000 every year to cover your expenses. That’s $5,000 a month. Remember, this is what you’ll be spending- a lot of people might make $60,000 a year, but after taxes, savings, debt payments, and retirement contributions, they end up spending a lot less than $60,000. 

Step 2: Use the 3-4% Withdrawal rate

Now that you know how much you’ll be spending, let’s figure out how much you need to have in your investment accounts to be able to NEVER run out of money. 

Economic investors use the 3-4% rule. What does this mean? It means that you can withdraw 3-4% of your portfolio, and assuming historical average rate of return and inflation, you could in theory retire and live off this investment portfolio forever without running out of money. 

How do we calculate this? 

If you want to spend $60,000 divide by .03 or .04 depending on your level of risk tolerance. 

$60,000 / .03 = $2,000,000

$60,000 / .04 = $1,500,000

That means you’ll need between $1.5M - $2M invested to be able to afford that lifestyle. 

Step 3: Consider Inflation

Now we already know that $60,000 today does not hold the same buying power as it did 30 years ago, nor will it have the same buying power 30 in the future. That’s because of inflation. 

On average, inflation rises at about 2% a year. The 3-4% rule accounts for inflation, which means that if you spend $60,000 in Year 1, in Year 2 you can spend $60,000 x 1.02 = $61,200. This means that your lifestyle can still stay at the same level, even with prices going up. 

Step 4: Consider Extra income

If you’re looking to retire early, social security won’t matter much to you until you reach at least 62 years old. But maybe, you don’t want to stop fully working either. With financial freedom, you’re able to work part time, take a job you enjoy rather than a job just for the paycheck, or go down to one salary if one spouse wants to stay home and raise children or other enjoy pursuits. 

Make sure you calculate this into your equation. If you’re making $30,000 a year, you only need to withdraw $30,000 from your investments- not $60,000! So that automatically lowers the amount you would need to be financially free. 

Step 5: Track your Progress

Saving and investing so you have $2M in your bank account might seem like a faraway goal or completely overwhelming. We’re here to tell you that it is not! It might take time and discipline, but here are our best tips to make it happen for you: 

Start saving early: the earlier you start, the more time your investments will have to grow, and the more money you’ll have

Spend mindfully: debt can be a dream killer. Make sure you’re spending less than what you make and avoid those high interest loans and credit cards

Keep Investing: Make sure you’re investing with every paycheck, no matter the current economic climate. The markets will go up and down but the only way for YOUR money to go up? By investing. 

Bottom Line

Quitting your soul sucking job, living the life you dream of- on YOUR terms- is absolutely possible. With a little planning and motivation you can track your expenses, and figure out how much money you would actually need invested. It’s possible to retire and never run out of money! The goal might be closer than you think!

Want more tips on how to reach financial freedom and THRIVE in retirement? Check out our Ultimate Money Guide to get started!