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How To Buy Financial Freedom With Just 2 Hours A Day

Want to gain financial freedom and not have to worry about money again? You might be surprised that its easier than you think. All you need to do is follow these proven steps for financial success...So often it’s tempting to think that spending $5 on a fancy coffee is “only” $5.

What difference could such a sum really make if you saved it?

Of course, the reality is that thanks to compound interest, $5 spent today is worth lot more in the future.

Don’t believe me?

Imagine you buy such a coffee every morning on your way to work. That’s $5 multiplied by 5 days a week, multiplied by 4 weeks in a month.

That’s $100 a month, or $1200 a year.

Do that for 20 years and you’ve spent $24,000 on coffee. Suddenly that $5 a day doesn’t sound quite such a small sum does it?

But there’s more.

If we assume that you put that $5 each workday into savings, and earned 5% annual interest on it, our trusty compound interest calculator tells us we’d have $41,274.63 in the same time frame.

You almost doubled your money.

This means that buying said coffee doesn’t cost you $5, it actually costs you $8.60 in potential future earnings.

And that’s just over 20 years. Calculated over 30 years that coffee just cost you $11.61 in future earnings potential.

I don’t know about you but that seems a lot to pay for a coffee.

It’s this reality that money saved, and left to accrue compound interest, is worth so much more than you realize that means you can probably gain financial freedom a lot sooner than you might imagine.

How much sooner?

That’s what I want to investigate today…

Your Hourly Rate

Unless you’ve already achieved financial freedom, or won the lottery, you probably work for a living. But the sum we earn isn’t always as easy to define as you might imagine.

Firstly, there’s tax to consider. Then there are the “costs” of doing your job – such as getting to and from work, buying new work clothes – and so on.

The easiest way I’ve found is to take my monthly (take home) salary, subtract what it cost me to actually do the job, and then divide this by the hours I actually worked.

For example lets say I took home $3000 this month. I spend roughly $300 a month on getting to and from work – costs I wouldn’t have if I didn’t need to work. This means I profited by $2700 this month. I work 40 hours a week (160 hours a month) so I earn, on average, $16.88 per hour.

Applying Compound Interest

Let’s imagine that you’re 30 years old, earning that $16.88 an hour at your job. What is each of those hours worth in 30 years time when you consider retiring to Florida to live out your days in the sunshine?

At 5% annual interest the answer is $75.42.

Now of course this isn’t a fixed figure. As time goes on, the compound interest period would get smaller and smaller, meaning less direct interest. But at the same time your earnings power would likely go up. That $16.88 could double or treble in a very short space of time (my income has gone up 235% in the last decade, for example).

But lets use the above base figures to extrapolate a little further.

$75.42 divided by $16.88 is 4.5.

That means that the money earned every day – if saved – could buy 4.5 days – almost a week of freedom – in the future.

Just let that sink in.

Working one day and putting the money into a savings account could buy us almost a week of early retirement.

Put another way, our friend could buy a whole day of future freedom by working just a couple of hours.

This is why you need to start saving early.

This is why you need to start saving as much as you can.

And this is why even those tiny little daily expenses make such a big difference.

$5 isn’t $5. And even just a few dollars put away multiplies massively over time.

And that’s how – in theory at least – our imaginary worker could buy himself a future day of financial freedom and early retirement just by saving the equivalent of a couple of hours earnings.

Now that’s powerful.

Conclusion

Let me be honest; I’m not an economist. I can’t predict what interest rate you’ll earn. I don’t know your financial circumstances. I certainly can’t predict the future and I am aware that I haven’t factored inflation into the above calculations.

The point isn’t necessarily the exact figures given – they’re just for illustrative purposes.

The point is that your money can multiply many, many times over in the future thanks to compound interest. The more you save, and the earlier you start saving, the more you should have at the end.

And, as we’ve seen, even small amounts of money saved can have a tremendous impact on your future wealth, date of retirement and – ultimately – your financial freedom.

So let me ask you – do you still want to grab that cup of coffee this morning?

Want to gain financial freedom and not have to worry about money again? You might be surprised that its easier than you think. All you need to do is follow these proven steps for financial success...

Richard

Sun-worshipper and obsessive frugality blogger. For loads more money-saving advice come and join us on Facebook.

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