Understanding how two simple financial rules of thumb can lead to financial independence can be life changing.
Financial independence occurs when income generated from assets is enough to cover your expenses. At that point working for a paycheck is optional and you're financially independent.
Rule of 25
The Rule of 25 attempts to define how much money you’ll need to save for your retirement. Not surprisingly, based on the name of the rule, that amount is 25 times your annual expenses (not income).
The 4% Rule, also known as the Safe Withdraw Rate (SWR), is a framework financial planners and retirees use to determine how much of a stock portfolio can be spent each year without ever running out of money.