Money does not make you happy. But to be happy, you need (a lot of) money.

How much money do you need?

The 4% rule – Trinity Study

In a previous post What? do you want. ,I discussed the importance to understand what really matters to you in life. Only after you are clear about this, you can start to determine how much money you require to live the happy life you have pictured for yourself. This study is hence maybe the most crucial cornerstones of the FIRE (Financial Independence Retire Early) movement.

The Trinitiy Study essentially argues that if an an initial spending of 4% of your overall assets can cover your costs of living, then you are financial independant and you do not need to work anymore.

Let´s assume to live your happy life you require 100.000 USD each year. As it is 4%, you just need to multiply it with 25 to calculate the required amount of asset. Hence, this would mean you require assets of 2.5 Million USD. This looks like a simple calculation. But knowing exactly how much you need is crucial to plan your next steps, as now you have a clear target.

Do not get overwhelmed with this high figure. You really need to adjust it according to your preferences. Take the example of Kristy Chen, who retired in her thirties with about one Million USD and now spends most of her time roaming around in Southeast Asia, doing whatever she wants to, whenever she wants to. If you want to read more about the FIRE movement, and how she did it, I can really recommend you reading her inspring book:

Quit Like a Millionaire: No Gimmicks, Luck, or Trust Funds required.

Kristy Chen