Last Updated on May 30, 2025 by Chin Yi Xuan
Is this how I want to spend the rest of my life doing?
Recently, a friend shared this thought with me over lunch.
Since graduating, he has been going with the flow. He joined the workforce, worked hard during the week (sometimes even on Saturdays), and felt burnt out while always looking forward to public holidays.
As he turns 30, the idea of continuing this intense burnout loop fills him with fear and anxiety. Can he maintain this lifestyle for another 20 or 30 years?
Can he afford to click the ‘pause’ button now to rethink life?
Freedom Floor: Rethinking and Simplifying Freedom
If my friend’s story above rings a bell, I’d like to introduce you to the concept of ‘Freedom Floor’.
I recently came across this term via Dean, the founder of Wolo Yoga – a venture he and his wife started after he got laid off from a high-paying job.
The idea of Freedom Floor is pretty straightforward: it’s the point where you no longer need to work for money – at least, not for financial security.
The Freedom Floor is made up of two parts:
- A 12 – 24 month expenses buffer: This is your savings (cash or easily-accessible funds) that’ll cover your daily expenses if you stop working today.
- CoastFI: A state of financial independence (FI) where your investments reach a point where, without further contributions, will grow to fund your retirement.
Combined, they will form the foundation of your finances – giving you the freedom of choice in life.
How to Calculate Your Freedom Floor
Step 1: Estimate your monthly living expenses (food, housing, transport, insurance, other family expenses). For instance, if it is $4000/month, that’s $48,000/year.
Step 2: Multiply the figure ($4000) by 12 or 24 to get your expenses buffer. For this example, it’d be either $48,000 to $96,000 in savings (Cash or liquid assets).
Step 3: Then, find out how much you need to invest now so it can grow and fund your life at retirement. As an example:
- You are 30 today and plan to retire by 60. That means you have 30 years left before you retire.
- At 30, you have $100,000 invested.
- We use the following assumptions:
- A return of 8% per annum in our investments
- Every month, you continue to invest $3,000 in your portfolio
- An inflation rate of 3% per annum
- An annual expense of $48,000 after retirement
- A 4% Save Withdrawal Rule (SWR). Meaning, every year after you retire, you’ll withdraw 4% from your portfolio to fund your expenses.
Keying the info above in this CoastFI calculator HERE, we’ll learn that:
- You’ll need $1.2M by 60 years old to sustain your retirement lifestyle of $48,000 per year.
- If you continue to invest for the next 6 years, by the time you turn 36, your portfolio would grow to $372,081.
- By then, even without further contribution, your investment portfolio will continue to grow and sustain your retirement expenses.
In other words, $372,081 is your CoastFI number.
Your Freedom Floor will be the combination of your:
- $48,000 to $96,000 in savings
- $372,081 investment portfolio
You are not financially free in the sense that you do not have to work again for life.
But you now have the space and choice to hit the pause button in life. To reflect. To experiment. And to rebuild.
You now have Freedom of Choice in life.
Why most people never come close to building their Freedom Floor?
The reason is simple: Constantly-moving goalposts in life.
People tend to upgrade their lifestyle as they earn more. Sometimes way too much.
Bigger house. Larger cars. Premium watches. Spotify Premium. You get my point.
When your lifestyle upgrades (and commitments) grow as fast as your income increment, you leave no space for Freedom Floor to exist.
What happens once you hit your Freedom Floor?
You’d probably still need to work.
But this time, you can make career decisions from the position of passion and curiosity instead of fear.
No more putting yourself at the mercy of your manager or bosses. No more uninspiring projects. No more intense schedule that makes you sick.
You now get to build your life on your own terms.
It’s not going to happen overnight. But with a clear direction, it will happen. Slowly but surely.
