How Much Money Do You Need for Financial Freedom?
October 15, 2021
Your financial freedom number starts with the life you want to pay for. Before I ask how many properties or how large an investment portfolio I need, I want to know the monthly income that would cover my household’s spending without depending on work I no longer want to do.
In my October 2021 video, I worked through that exercise with Nick, who was normally behind the camera. We had different family circumstances and arrived at different rough figures. His estimate was around £3,300 a month; mine was around £6,300, excluding private schooling.
Those were informal budgets from 2021, not current living-cost benchmarks. The useful lesson is the method: build the figure from actual needs and chosen comforts, then connect it to income after the costs and tax that apply.
You can watch the original financial freedom budget exercise to see how the conversation developed.
Start with spending rather than a headline wealth target
It’s easy to decide that financial freedom means a million pounds, ten houses or some other memorable target. But the same portfolio can support very different lifestyles depending on its income, debt and costs.
A household needing £2,000 a month faces a different income requirement from one needing £6,000. Neither figure is automatically right or wrong. They describe different commitments and choices.
I’d rather understand the spending first than work towards an asset total that may not provide what I need. Property value is particularly easy to confuse with usable income when a large mortgage and operating costs sit behind it.
My article about the profit left from £1,000 rent explains why gross rent isn’t the number to compare with the household budget. The money available after the relevant costs is what matters for living expenses.
Housing was our biggest starting difference
Nick and I began by looking at housing. In the video, we discussed around £1,400–£1,500 a month for his needs in Oxfordshire at that time. I used roughly £2,500 because I had a larger family and needed more space.
We were aiming at a reasonable lifestyle rather than private jets and enormous houses. Even so, family size created a substantial difference before we had considered transport, food or anything else.
Those old rental figures shouldn’t be copied into a budget today. I’d look at the actual location and accommodation required, and separate costs such as council tax if they aren’t included. An informal conversation can easily blur what sits inside a headline housing amount.
If I own the home, I’d use the relevant mortgage and ownership costs instead. A mortgage-free home still has maintenance, insurance and other expenses, so I wouldn’t simply remove housing from the calculation altogether.
Transport depends on the life you’re planning
For Nick, the conversation arrived at about £500 a month for a car including an allowance for insurance. For me, I used roughly £1,000 for the transport arrangement I thought the family needed, while acknowledging that I was spending more at the time.
That distinction between current spending and a reasonable target is useful. I might choose a less expensive car without feeling that the intended lifestyle has disappeared. Or I might decide that a particular transport arrangement is important enough to keep.
I’d include the costs that don’t arrive as neat monthly payments: servicing, tyres, insurance renewals and repairs. Dividing an annual estimate by twelve makes the monthly target more realistic.
I wouldn’t assume every household needs the same number of vehicles or the same specification. The aim is a budget for the life you’re actually considering, not a list of possessions that someone else says financial success should include.
Food and household bills need their own allowance
We then discussed food, utilities and other household bills. Nick estimated around £500 a month in the informal exercise, while I used about £1,200 for my larger family.
Again, those figures reflected the discussion at the time. They weren’t a detailed audit of every bill, and they aren’t current price guidance. For a proper plan, I’d use recent statements and check that the main categories haven’t been omitted.
It can help to distinguish the essentials from costs that vary with how much time you’re spending at home. If financial freedom means leaving a job, travel costs might change while household energy or leisure spending moves in the other direction.
I’d also leave room for uncertainty. A budget that assumes every month looks exactly like the cheapest recent month is unlikely to describe the amount needed comfortably over a full year.
Include enjoyment rather than pretending it costs nothing
We included money for going out, holidays and clothing. I wanted the exercise to reflect a life worth working towards, rather than the absolute minimum needed to get through each month.
In the video, we discussed roughly £500 a month for going out and other enjoyment. Holiday budgets were converted into monthly amounts: a £6,000 annual holiday budget, for example, is £500 a month.
That conversion is useful because holidays can feel like exceptions while still being a predictable part of annual spending. The same applies to gifts, subscriptions, hobbies or other things that matter to the household.
I don’t think the answer is to remove every enjoyable item just to reach freedom sooner. I’d rather see the choice clearly. If a comfort requires a larger income target, I can decide whether it is worth the additional work or investment needed.
Our totals were working estimates, not exact calculations
The figures we arrived at were about £3,300 a month for Nick and about £6,300 for me. The conversation was deliberately informal, and the rounded line items and spoken additions weren’t a fully reconciled financial plan.
That matters because a memorable final number can sound more precise than the exercise behind it. I would use it as a first draft, then check each category and make sure the total matches the actual assumptions.
I also excluded private schooling from my main figure, despite discussing it separately. Someone copying the total without noticing that exclusion would misunderstand what the budget was intended to cover.
A good financial freedom number should have a clear scope. I want to know what is included, what is excluded and which costs may change in the future. That is more useful than presenting a rounded estimate as an exact lifelong answer.
Convert monthly spending into an income requirement
Once I have a monthly target, multiplying by twelve gives the annual spending requirement. A £3,300 monthly budget is £39,600 a year; £6,300 a month is £75,600 a year.
Those figures describe spending money, not necessarily the gross income needed to provide it. Tax and the costs of generating the income need to be considered separately. Rental turnover, for example, must first support the property and its finance.
The government’s guidance on working out rental income is useful background for that distinction. The applicable tax calculation depends on the circumstances and ownership structure, so I’d have the actual plan checked appropriately.
I would also avoid treating money borrowed through refinancing as recurring income for living costs. It may create cash temporarily, but it adds debt and obligations. A spending plan needs to recognise where the money genuinely comes from.
Allow for uneven investment income
Property income doesn’t arrive with the certainty of a fixed salary. Empty periods, repairs and changes in finance can make one month or year much weaker than another.
If the household relies entirely on that income, reserves become particularly important. I don’t want the family’s spending plan to depend on every room being occupied and every appliance working throughout the year.
I’d therefore separate the property’s own contingency funds from the household’s available spending money. A balance held for a roof repair isn’t spare income just because the repair hasn’t happened yet.
My property investment planning article explains why the strategy needs to connect the assets with the desired outcome. Reaching the gross rent target is only one step; keeping the income dependable enough to live on is another.
Family changes can move the target
One reason my figure was larger was the size of my family. At the time, we had three children and a fourth on the way. Housing, cars, food and clothing were all affected by that circumstance.
The same principle works over time. A household’s needs may rise or fall as children grow, housing changes or other commitments end. A target calculated once shouldn’t be treated as permanently correct.
I’d revisit the budget when a significant change happens and periodically even when life seems stable. Prices change, priorities change and the lifestyle imagined several years earlier may no longer be the one I want.
That doesn’t make planning pointless. It makes the plan something to maintain. A current, realistic figure is more useful than a perfect-looking spreadsheet based on a household that no longer exists.
A strong reason helps turn the number into action
At the end of the video, Nick talked about wanting a better future for his family as he began thinking about investing. I thought that motivation mattered because it connected the numbers with something personal.
A target is easier to work towards when I understand why it matters. The purpose might be more time with family, more choice over work or less dependence on one source of income. It doesn’t have to look impressive to anyone else.
I would then break the plan into achievable steps: understand current spending, build reserves, learn the investment approach and assess opportunities carefully. The desire for freedom shouldn’t become a reason to accept unrealistic returns or rush into a deal.
There is no need to pretend the entire outcome arrives at once. Reducing an expensive commitment or building one reliable income stream can improve choice before the full target has been reached.
Our compound interest calculator can help explore how starting capital, regular contributions and time affect an illustrative pot. I’d compare several return and inflation assumptions. It models steady growth before tax and fees, so it isn’t a forecast or a rental-income withdrawal plan.
Build your own number, then test the plan behind it
The point of our exercise wasn’t that everyone needs £3,300 or £6,300 a month. It was that financial freedom becomes more concrete when you price the life you want and understand the income needed to support it.
I’d make the first estimate, check the missing costs and then test whether the investment plan can provide that income with room for difficult periods. If you’d like to discuss that plan, book a free 30-minute call, explore the Starter Club or find out about Done For You.