Well, it's not just any beer but your #financialbeer 🍺?

Have you heard of that before?

I'll take my chances and say no, not really - unless you are my client, and know that I love to use analogies and mental images when talking about personal finances.

Back to the point, how can thinking of a beer get you closer to financial freedom? Well, here's my analogy:

The idea of **financial freedom** is to reach a level in which our lifestyle is funded by what our assets produce each year. So now, join me and picture that all your assets are inside this #Beer 🍺. At the end of each year, you will

__ONLY__**remove the foam it has produced over those 12 months and live from that.**

As long as your beer is constantly producing enough 'foam' to fund your lifestyle, then you will be financially free!

Does that make sense?

It's a good idea, but how do we calculate the size of my beer?

There are THREE simples steps.

We will use the fictional character Mike Hannigan (I'll get you an actual beer next time we meet if you know who this person is without Googling it) to find out the size of his beer as he would love to receive a passive monthly income of USD 3000 (today's value) in 15 years.

__STEP ONE__**: Defined your desired income and don't forget about inflation**

__STEP ONE__

Since Mike wants a monthly income of USD 3000 - he knows that with that income, he can cover all his basic expenses, then his annual income should be USD 36,000 every year.

Now, an important thing to remember is that USD 36,000 today won't be worth the same in 15 years. Since we can't know exactly what will be inflation over the next 15 years, we can just the international standard of 3% annually.

How do you calculate that?

Option 1: $36,000 x 1.03 (do it 15 times)

Option 2: The power of Google. Look for a Future value calculator or any retirement calculator

Option 3: Multiply your annual desired income by any of the following factors (which is basically a compound interest chart)

5 years: 1.15927

10 years: 1.34391

**15 years: 1.55796**

20 years: 1.80611

25 years: 2.09377

30 years: 2.42726

Solution: $36,000 x 1.55796 = **$56,086.56**. This is the annual income Mike should aim for in 15 years to have the same lifestyle of what's $36,000 today.

__STEP TWO__**: Calculate the size of your beer**

__STEP TWO__

Now, we want a beer that produces steady foam. How do we achieve that? By selecting a return that is very stable.

4% or 5% fixed annual income could be considered a steady return so if we take 5% as our aimed return, we simply divided the $56,086.56 and divided by 5%.

$56,086.56 / 0.05 = **USD 1,121,736**** 🍺**

This means that Mike needs over a million dollars in assets to become financially free and he will be living from the 5% it annually produces.

__STEP THREE__**: Define a strategy to fill that beer ****🍺**

__STEP THREE__

Since Mike does not have these assets, his job is to design a strategy to get there. Getting to a million dollars may seem challenging but if he breaks it down into the time he still has, then it may become achievable.

There's not just one way to get there but once you create a strategy you should consider the three following things:

The longer you wait, the harder it is to fill that beer as you have less time.

This beer will be the mix of all your assets.

You should not rely on just one type of asset in your beer. We have all heard the "don't put all your eggs in one basket" saying.

**Problems to define your ****🍺 ****size?**** **

Let me help you! If you are an international citizen living in East Asia, we can have a quick 15 min chat.

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