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Old 08-14-2010, 05:03 PM
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DavidBibby DavidBibby is offline
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Default Being Financially Free

One of my goals is to be financially free. Not just DEBT free.. but FINANCIALLY FREE.

What does that mean?

To me.. that means I have a nest egg large enough so that my family and I can live off of the interest.

If I'm only living off the interest.. that means.. so long as my investments are safe (so that the principal is never touched).. I could get interest payments for the rest of my life, and when I die, I can pass it on to my children.

So how much will I need to do that?

First... I'd determine how much I need to live on each month. If I had no debt and owned my home.. I could continue to maintain my middle class lifestyle easily with about $2500 a month. If I wanted to entertain and travel more, maybe $4000 a month would do.

Here's how to figure it out. Take the monthly amount that you need, multiply it by 12 (for 12 months), divide it by a conservative interest rate and the result is the size of the nest egg you'll need.

Here it is again:

$2500 * 12 / .05 = $600,000

I DID say conservative.. because we don't want to dip into the principal...but maybe 5% is just too low...

So here they are again at slightly higher rates...

$2500 * 12 / .06 = $500,000
$2500 * 12 / .07 = $428,571
$2500 * 12 / .08 = $375,000
$2500 * 12 / .09 = $333,333
$2500 * 12 / .10 = $300,000

Now what if I wanted $4000 a month?

$4000 * 12 / .05 = $960,000
$4000 * 12 / .06 = $800,000
$4000 * 12 / .07 = $685,714
$4000 * 12 / .08 = $533,333
$4000 * 12 / .09 = $480,000
$4000 * 12 / .10 = $436,363

So you DON'T need MILLIONS of dollars in order to be financially free. You just need the right size nest egg, at a good conservative interest rate and you can live off the interest for the rest of your life.

So now that you have the formula.. let me ask you a question.

If you had NO debt.. lived in a paid off house... how much would you need to live on? How much of a nest egg would you need to build?

Will that support your lifestyle?

Last edited by DavidBibby; 08-14-2010 at 09:06 PM.
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Old 08-16-2010, 05:20 AM
Alex Richards Alex Richards is offline
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Default Re: Being Financially Free

Interesting stuff David. I think I would need around $600,000 because although I don't spend much, the savings rates in the UK can get so low sometimes -as at present. However, I would probably need less because I think I could invest some of that amount in shares and receive a higher rate of return.
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Old 08-16-2010, 02:50 PM
lighthouse lighthouse is offline
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Default Re: Being Financially Free

Love the info!
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Old 09-05-2010, 03:41 AM
alfredjony alfredjony is offline
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Default Re: Being Financially Free

for tens if you put aside 5000 $ per month, you can accumulate 600,000 $ in ten years.
this information is great for the people who are in their twenties and early thirties.

but question is how to accumulate 5000 $ per month.
answer in one phrase will be save and invest
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Old 09-03-2011, 03:02 PM
Fredy Atwater Fredy Atwater is offline
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Default Re: Being Financially Free

David Bibby posted this question sometime ago. I liked so much his response that I decided to post this subject again for discussion because it is certainly worthwhile for all of us wanting to retire on passive income.

This is the great response David provided

Being Financially Free
One of my goals is to be financially free. Not just DEBT free.. but FINANCIALLY FREE.

What does that mean?

To me.. that means I have a nest egg large enough so that my family and I can live off of the interest.

If I'm only living off the interest.. that means.. so long as my investments are safe (so that the principal is never touched).. I could get interest payments for the rest of my life, and when I die, I can pass it on to my children.

So how much will I need to do that?

First... I'd determine how much I need to live on each month. If I had no debt and owned my home.. I could continue to maintain my middle class lifestyle easily with about $2500 a month. If I wanted to entertain and travel more, maybe $4000 a month would do.

Here's how to figure it out. Take the monthly amount that you need, multiply it by 12 (for 12 months), divide it by a conservative interest rate and the result is the size of the nest egg you'll need.

Here it is again:

$2500 * 12 / .05 = $600,000

I DID say conservative.. because we don't want to dip into the principal...but maybe 5% is just too low...

So here they are again at slightly higher rates...

$2500 * 12 / .06 = $500,000
$2500 * 12 / .07 = $428,571
$2500 * 12 / .08 = $375,000
$2500 * 12 / .09 = $333,333
$2500 * 12 / .10 = $300,000

Now what if I wanted $4000 a month?

$4000 * 12 / .05 = $960,000
$4000 * 12 / .06 = $800,000
$4000 * 12 / .07 = $685,714
$4000 * 12 / .08 = $533,333
$4000 * 12 / .09 = $480,000
$4000 * 12 / .10 = $436,363

So you DON'T need MILLIONS of dollars in order to be financially free. You just need the right size nest egg, at a good conservative interest rate and you can live off the interest for the rest of your life.

So now that you have the formula.. let me ask you a question.

If you had NO debt.. lived in a paid off house... how much would you need to live on? How much of a nest egg would you need to build?

Will that support your lifestyle?

--------------------------------------------------------------------------------------

It took me 53 years to think of this solution and I came up with a business plan. I bought 20,000.00 shares of Fannie Mae pennystock at .026 cents per share.

I choose Fannie Mae because this company was a blue chip stock, backed by the government. After the financial meltdown the USG took control of the company.

My goal is to continue buying fannie mae shares until I have at least 100,000 shares. Then I would sell when the stock hopefully raises back to it's old value. Is it possible ? I think so.

I have done my research and I have found out there are a few companies like AIG that went from .37 cents per share on March 2009 up to 23.66 on Sept 2 2011.

When the fannie mae or the real estate market recovers I want to have at least 100 thousand shares.

Caveat.

*I can afford to lose that money I am investing.
*Although the stock market is speculative I am not short selling. Meaning buying and then selling soon for a quick profit.
*I have a long term plan.
*45% of our money free from debt is going towards "speculative investment" the stock market. The remaining 55% is going towards savings because our savings are the foundation to everything we want to buy and having cash available prevents me from being pressured to sell my stock. This is very important.

I bought the Fannie Mae blue chip stock for .026 cents per share and on friday Sept 2 the price went up to .032. We have gained $1,200.00 in just a few days.But I am not for the little money so I will not sell now.

I want to make that big money and then I will probably deposit the money in an Oppenheimer Municipal fund ( OPCCX ) which is State and Federal Tax Free.This fund yields 4.88% per year after sales charges. Just like David I am researching well in advance for a bond municipal fund that is more stable than a stock fund.

I would probably buy those municipal funds from Scottrade because they have a $2,500,000.00 million FDIC insurance. I have not checked if my Wells Fargo bank has such a high protection FDIC insurance.

I have never had a Scottrade account but soon I will need one. Because there another blue chip stock I am planning on investing that Wells Fargo won't allow you to buy. But Wells Fargo does trade with Fannie Mae.

Penny stock is a name given by some experts to identify stocks worth less than $5.00. To others a penny stock is the one worth less than a dollar. The NYSE does not accept companies with a stock value less than a dollar. The stock companies worth less than trade over the counter in the OTC market. So Fannie Mae is an OTC stock. The great thing about buying the right penny stock is that can make a fortune without so much investment,

Warren Buffett just bought 20,000.00 shares of a BofA special dividend stock worth $100,000.00 a piece making $300,000.00 in dividends quickly. But the Bank of America and three of subsidiaries are being sued by the Fed for billions of dollars. Those good news probably increased the value of Fannie Mae.

I try to follow Mr Buffett's advise. To buy good companies with a competitive advantage when the bad news hit them and then sell when the good news come.

This is what I can afford and still make a bundle of money to retire on.


What do you and everyone else think about my plan David ?

Thank You David for being so generous in your responses.
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Old 09-06-2011, 04:16 PM
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DavidBibby DavidBibby is offline
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Default Re: Being Financially Free

Freddy,

I don't see anything wrong with your plan here. But I am not anywhere near the stage you are at. You are where I hope to be in a few years

See.. I'm 34 years old, and I have no investments other than a rental house with tenants in it. I'm working very hard to pay off this property and also the one I live in.

I have no other debt.

Since I'm not at the investing stage yet, I haven't looked at the stock market nor have I decided what investments I will go for when I reach that point.

Like you I will do extensive research before I make a move.

You inspire me greatly Freddy!

Your research... and strategy are sound!

David
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Old 09-06-2011, 10:25 PM
Fredy Atwater Fredy Atwater is offline
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Default Re: Being Financially Free

Hi David :

Thank you for your kind remarks.

When I was your age although I was a practicing Endodontist (root canal specialist) in Mexico ,the little money I made I lost it all and went into foreclosure, bankruptcy and divorce. At the Amway meetings I used to attend in Mexico they used to say that for the Chinnese a crisis was an opportunity for change. I later moved back to NYC my hometown and I met my new wife one or two weeks after I moved to rent a room in her house back in the year 1997. I was 39 years old.

It took me many years of hard study and trial and error doing real estate that I am slowly grasping the concepts. You have noticed I recommend The transforming Debt Into Wealth System . That's because I was financially illiterate.

Now I am 53 year old , happily remarried after 13 years and financially literate. I am almost 20 years older than you. I think you are doing great.

David do not hesitate to buy the Tao Of Warren Buffett by Mary Buffett and David Clarkthe book is full of wisdom , clearly written and hands on. It took me like 6 years to apply all of Warren Buffett's concepts along with the concepts of Benjamin Graham (Warren's mentor ). If anyone has not read the books by Mary Buffett and David Clark you are littering a chance to be wealthy.

I was a real estate investor but I have been ill for three years. I can't do more fixer uppers and renting units scare me.

So one night i figure out how to bring $5000.00 monthly and I then saw your post the one I placed here and I was so impressed by your ken vision despite your young age.

Thank you for accepting me and your remarks about my plan uplift me. By the way my Fannie Mae went up another .020 cents. to .0335.


Dr Alfredo A. Atwater
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Old 09-06-2011, 10:41 PM
Fredy Atwater Fredy Atwater is offline
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Default Re: Being Financially Free

David check this website 360 degrees financial and you fill find a link called building a portfolio. I want you to take a look at it. Is a pyramid . The foundation of the pyramid should be in cash in the tip of the pyramid are the speculative investments and real estate in the middle.

I hope you like it

Everything that's easy started by being difficult, Ken Mc Elroy ( real estate investor )
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Old 09-06-2011, 11:19 PM
bobbyseal bobbyseal is offline
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Default Re: Being Financially Free

David,

I like your thoughts on gaining passive income from other sources. I think the most common that people do this with would be rental property (commercial, residential or vacation), dividend paying equities, and maybe an annuity.

I am concerned that what you have listed is somewhat simplistic though. I agree that $600k with a 5% return is going to get you $2500/month. However, I think it's much harder to get a low risk 5% return.

For example, the dividend aristocrats yield 3.12% - which is a far cry from the 5% you wish to have. Since the beginning of the year the dividend aristocrats have returned -5.28%. So, it's not a safe investment such as a CD. If you just put your money into the top 20 yielding aristocrats you're at a 4.12% yield. Also, remember the tax man is going to take 15% of your cash.

Anyway, my point is that it's not easy to get such a high yield and safe haven for one's cash. I do think rental property is advantageous based on the tax benefits (which could change, who knows), possible appreciation, and ability to match inflation with rising rents. But it's a lot more labor intensive than writing a check to your favorite dividend aristocrat and waiting for the dividends to come back every quarter.

In the end my goal is to have multiple sources of passive income. I like dividend paying stocks and rental property.

Disclosure - I own a rental property that is currently an alligator. Long on multiple dividend aristocrats and achievers.

In
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