The formula
Live Free Number = annual expenses ÷ portfolio yield. Three examples for someone spending $5,000/month ($60,000/year):
- At a 4% withdrawal rate (classic stock/bond retirement math): $60,000 ÷ 0.04 = $1,500,000
- At a 7% blended yield (dividends + real estate): $60,000 ÷ 0.07 ≈ $857,000
- At a 10% yield (income-focused alternatives and private funds): $60,000 ÷ 0.10 = $600,000
Step 1: Know your true monthly expenses
Pull 3–6 months of bank and card statements and total everything: housing, transport, food, insurance, subscriptions, debt payments, and an honest average of irregular costs (travel, gifts, repairs). Most people underestimate by 15–25% because annual and irregular expenses hide between months.
Then decide which lifestyle you're solving for: your current life, a leaner version, or an upgraded one. Your number should reflect the life you actually want to fund — including health insurance if you'd leave employer coverage.
Step 2: Choose a realistic yield
Yield is the income your portfolio reliably produces. Broad index funds support roughly a 4% safe withdrawal rate. Dividend and bond-heavy portfolios produce 4–6%. Cash-flowing real estate often nets 6–10%. Income-focused private funds commonly target 8–12% distributions. Most investors blend these, landing between 5% and 10%.
Be conservative: it's better to reach your number at an assumed 7% and discover you're earning 9% than the reverse. Higher yields also typically involve less liquidity or more risk — understand the trade before you count on the number.
Step 3: Stress-test for inflation and taxes
Two adjustments make the number durable. First, inflation: at 3% annual inflation, expenses double roughly every 24 years, so either use a yield assumption net of inflation or plan to keep some growth assets in the portfolio. Second, taxes: if your passive income will be taxable, gross-up your expense figure (e.g., divide by 0.85 if you expect a 15% effective rate on investment income).
How to shrink your number
Your Live Free Number has two inputs, and both are levers. Cutting $500/month of permanent expenses reduces the target by $60,000 at a 10% yield (or $150,000 at 4%). Improving blended yield from 5% to 8% on a $60,000/year lifestyle drops the target from $1.2M to $750K. Most successful paths combine moderate expense discipline with a deliberate shift toward income-producing assets over time.
Frequently asked questions
Is the Live Free Number the same as a FIRE number?
Same concept. The classic FIRE number uses 25× annual expenses (a 4% withdrawal rate from stocks and bonds). The Live Free framing lets you use your actual blended portfolio yield — which, with income-focused assets, can be meaningfully higher and the required capital meaningfully lower.
Should I use gross or net expenses?
Use real after-tax spending, then add expected taxes on the passive income itself plus health insurance if you'd lose employer coverage. The goal is the all-in cost of running your life.
What if my expenses change after I hit my number?
Recalculate — it takes a minute. Most people hold a margin of safety (target 110–125% of bare requirement) so normal lifestyle drift and surprise costs don't break the plan.
Put this into practice
Reading builds knowledge. Your number builds urgency. Calculate the exact capital that makes work optional for you.