Step 8 - How it Works
Part A: Plot Your Investment Income on Your Wall Chart
Plot your investment income as a separate line on your wall chart.
Part B: Project Your Investment Income into the Future
You have developed savings, have invested that money and have been receiving interest on that capital – which you have been posting on your wall chart. Now on your wall chart you can project that monthly income into the future.
With a light pencil line, project your monthly investment income into the future, based on your average rate of income each month.Part B. Project Your Investment Income into the Future
Part C: Project Your Expenses into the Future
Focus, for a moment, on the expenses line on your wall chart. As you have applied conscious spending strategies over time, this amount may have reached a comfortable level that no longer seems out of proportion with the amount of life energy it costs you; you may have determined a level of spending that is the peak of the fulfillment curve for your current life. You can now reliably estimate how much you will probably spend into the future.
Since expenses will fluctuate month to month, the determination of your monthly expense estimate going into the future is not based on the most recent month, but on the longer-term trend that you’ve been charting over time. (Refer to the FI web site for more information about the various ways people estimate their future expenses).
With a light pencil line, project the monthly expense line into the future on your wall chart.
Part D: Identify Your Crossover Point
Notice what happens with the “investment income” line: it crosses above the expenses line.
WOW!
This is the “crossover point” – the place where the monthly income from your invested capital exceeds your monthly expenses. At this point, you have defined “enough” and are financially independent. We often call the investment income line on your wall chart your independence income because you now have the freedom to choose whether or not you will work for money.
Plotting this on your chart will enable you to see approximately when you might attain this measure of financial independence and have enough to live at peak fulfillment without paid employment.
Plot your investment income as a separate line on your wall chart.
Part B: Project Your Investment Income into the Future
You have developed savings, have invested that money and have been receiving interest on that capital – which you have been posting on your wall chart. Now on your wall chart you can project that monthly income into the future.
With a light pencil line, project your monthly investment income into the future, based on your average rate of income each month.Part B. Project Your Investment Income into the Future
Part C: Project Your Expenses into the Future
Focus, for a moment, on the expenses line on your wall chart. As you have applied conscious spending strategies over time, this amount may have reached a comfortable level that no longer seems out of proportion with the amount of life energy it costs you; you may have determined a level of spending that is the peak of the fulfillment curve for your current life. You can now reliably estimate how much you will probably spend into the future.
Since expenses will fluctuate month to month, the determination of your monthly expense estimate going into the future is not based on the most recent month, but on the longer-term trend that you’ve been charting over time. (Refer to the FI web site for more information about the various ways people estimate their future expenses).
With a light pencil line, project the monthly expense line into the future on your wall chart.
Part D: Identify Your Crossover Point
Notice what happens with the “investment income” line: it crosses above the expenses line.
WOW!
This is the “crossover point” – the place where the monthly income from your invested capital exceeds your monthly expenses. At this point, you have defined “enough” and are financially independent. We often call the investment income line on your wall chart your independence income because you now have the freedom to choose whether or not you will work for money.
Plotting this on your chart will enable you to see approximately when you might attain this measure of financial independence and have enough to live at peak fulfillment without paid employment.