Everyone dreams of living a life where there is no tension of money, work according to one's own will, and one does not have to depend on any salary or business to meet the expenses. This is called financial freedom, and today we are going to tell you a very easy and effective formula, which is called the 25x rule or the 4 percent rule.

What is the 25x rule?

According to the 25x rule, if you save or invest 25 times the amount of your annual expenses, then you can call yourself financially free. Meaning, your deposited capital should be so much that by withdrawing only 4 percent of it every year, you can meet your expenses and still your capital will not be depleted for many decades.

Understand this math with an example.

Suppose your annual needs, bills, travel, and other expenses together are Rs 10 lakh. So to get financial freedom, you will have to create a fund of Rs 10 lakh × 25 = 2.5 crore. Now, if you withdraw only 4% of this fund every year, i.e., Rs 10 lakh, then your life can go on comfortably and your investment will also last for a long time.

The correct assessment of expenses is the real key.

The most important thing in this formula is the correct calculation of your actual annual expenses. This should include not only food and accommodation, but also every need, like travel, children's education, medical expenses, car expenses, and entertainment. The more honestly you assess the expenses, the more accurate your goal of financial freedom will be.

Before starting the journey of financial freedom, you should also keep an emergency fund of 3 to 6 months ready. This will help in situations when you suddenly lose your job, have a big expense, or have a health emergency.

Create and protect this fund in this way.

Financial freedom is not achieved by just saving money, but by investing it in the right place. Therefore, invest this fund in the stock market, mutual funds, real estate, and other income-generating assets. Also, take the necessary insurance to protect your health and property.

In simple words, there is no restriction that financial freedom can be achieved only after retirement. If you make the right plan and invest in a disciplined manner, then you can become financially independent even at the age of 40.

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