The Three Pillars of Financial Independence

Three numbers to track on a financial independence journey.

Net worth

Your financial snapshot. Add up your assets and subtract your debts.

£200,000 in assets minus £50,000 in liabilities gives a net worth of £150,000.

Savings rate

How much of your income you are setting aside.

Savings ÷ income × 100.

For this calculation, use annual savings and annual take-home income. Saving £10,000 from £40,000 gives a savings rate of 25%. If you include pension contributions deducted before take-home pay, include those in both the savings and income figures so you are comparing like with like.

FI number

An estimate of the invested money needed to support your spending without earned income.

One starting calculation is annual expenses multiplied by 25. Spending £30,000 a year gives £750,000.

That comes from the 4% withdrawal rule of thumb: take 4% of the initial portfolio in the first year, then adjust that cash amount for inflation. It is a planning assumption, not a promise. How long the money must last, investment performance, taxes, fees and other income all affect what you need.

These numbers won't do the work for you. They help you see where you stand and whether your plan needs adjusting.