For a more efficient government and fast checkout lanes, we should tattoo our legislators with bar codes. Support a Constitutional amendment saying that corporations are not people and they do not have the right to spend money to buy our politicians. But do you know what it will take in savings or in side hustle income to make that dream a reality? Nearly everyone can tell you how much money they make, but far fewer are able to tell you how much they spend. Your Rat Race Freedom Number is the amount you need to be earning from your side hustle to cover your fixed monthly expenses.
This is similar to the premise of Robert Kiyosaki’s CASHFLOW board game, in which you escape the rat race when your non-job income meets or exceeds your monthly costs.
For instance, if you spend $40,000 a year, your Retirement Freedom Number is $1,000,000 in savings and investments.
If you’ve never taken the time to figure out what you actually spend in an average month or year, I encourage you to add it up. Well, you could downsize, move to less desirable area, bring in a roommate, or rent out a spare room on Airbnb. In extreme cases, if your job or income streams are location independent, you can ditch the high-rent completely and jump ship to a lower cost of living area. I bring this up only because it’s a big world out there and we tend to have a pretty narrow view of our living options. But since our contract with Verizon was up last year, I began researching some alternatives, and came across Ting. Ting charges you based on the minutes, texts, and data you actually use — which means savings each month for all but the heaviest users. After finally overcoming the inertia the phone companies bank on, we finally made the switch.
I’m pretty excited about our new phone plan for a lot of reasons, and will detail it all out in a post here soon. I’m not a Comcast hater, especially since I rely on their generally reliable service to run my business.
The last time I looked into cutting the TV entirely, they told me the Internet-only rate was higher than the 2 combined. I’m sure there are some ways to reduce these expenses but it would be tough to make a major dent in any of them. Do what you can to conserve water and electricity, but I wouldn’t go to extremes here.
This one is interesting, because it increases year after year as the insurance company assumes you accumulated more stuff! This was our actual annual grocery expense for 2013, which works out to about $6.42 per person per day.
We tend to eat pretty healthy (in my opinion), so that means lots of fresh veggies and not so much frozen Totino’s pizzas. Big Disclaimer: The figures above do not include any restaurant spending, which I consider fairly discretionary. I found around $1600 in trackable restaurant expenditures (on credit cards), or around $133 a month.
In 2013, there was several trips to the mountains, a drive to Southern California, and a trip back home to Seattle.
The trick to saving money on gas (aside from getting a more fuel-efficient car) is to make sure the majority of your miles are business-related — that way you can write it off.
Even though I spent more than $1200 on gas last year,  my company reimbursed me more than $1400 for the mileage I put on my personal vehicle.
If you have a gym membership, especially a fancy one, start to keep track of how often you actually go.
I was shocked to find that self-employed insurance rates had gone up literally 4-5x since I last bought my own insurance in 2008. For the 2 of us to buy our own coverage, we’re looking at a minimum of $468 per month. That means an annual cost of $5600 (that’s not locked in either) for the privilege of paying another $4500 before any actual coverage kicked in. In case you’re wondering, the Obamacare penalty for not buying your own insurance is a maximum of $285 in 2014.


Our friends who’ve taken the leap inform us a new side hustle might be required just to pay for day care. Think of it this way: if you carry credit card debt, in some meaningful way, a newborn with $0 to their name is wealthier than you. Unless that debt is fueling some sort of bootstrapped venture and you hope to see a positive return on it, you’re going backwards.
You tax rate may vary, but I like to err on the side of caution and divide your fixed expenses by a tax rate estimator. Since that $39,000 is your actual out-of-pocket cash expense, you’re actually going to need to earn more than that to have $39,000 leftover after taxes.
Essentially that means you have to live off 70% of your income, because 30% is allocated to Uncle Sam. Earning $55,700 will leave you with enough to cover your fixed expenses (but nothing else) after taxes. If you can chip away at your monthly expenses, starting with the smallest and working your way up, you’ll feel a greater sense of accomplishment, while still making meaningful progress toward your number. Imagine if your side hustle brought in enough to cover your electric bill or car insurance.
One consideration to keep in mind is how your Freedom Number might change if you were to make some lifestyle changes.
Either way, these are the kinds of calculations to consider when evaluating your Rat Race Freedom Number. If you’re like us, spending around $40,000 a year, that would mean a Retirement Freedom Number of $1 million in savings and investment accounts. The reason for that is you can probably find some reasonably safe investments that pay out 4% in interest or dividends, without ever having to touch the principal value.
Along these same lines, some financial experts suggest a 4% withdrawal rate on retirement savings could last you the rest of your life. Of course, amassing the $1 million net worth isn’t exactly a walk in the park, nor will it happen overnight. But imagine what could you accomplish if you had another 40-60 hours a week of free time all of a sudden. Join today and download the free report The 5 Fastest Ways to Make More Money, plus get actionable tips and insight to advance your side hustle each week. Also, the awesome thing about side hustling and having kids–you get to dictate your own hours and can much more reasonably juggle your lives so that you can take care of them yourselves. The other cool thing about the early retirement thing I forgot to mention is that it assumes you make $0 for the rest of your days. For example in 2013 a single person making $50k taking the standard deduction has an effective tax rate of only 15.6%. All these calculations aside, I think, after living the last 10 years abroad, the number #1 tip I would give folks is this: learn to live with less.
However, after a few financial reversals: expensive divorce, bad investments, prolonged unemployment and underemployment, I decided to hit the road and move overseas. I lived for a year in Chiang Mai (paid rent of about $190) in a very nice studio apartment and was never happier. And as for employment, thanks to Al Gore’s internet, I can make money off Western employers.
By the way, thanks for sharing a link to my post about how to negotiate with Comcast, Nick. 2) Shopping – all companies will raise your premiums over time, even the cute CGI lizards. Read about Uncle Sam and James Montgomery Flagg’s famous recruitment poster on Wikipedia. In fact, until I spent some time poring over a year’s worth of credit card and bank statements, I really had no idea either. We’d only ever ballparked the numbers before, but digging into the actual data was pretty fun for my inner spreadsheet-loving nerd.
If you reduce your living expense, options open up to you and your Rat Race Freedom Number all of a sudden becomes easier to achieve. According to their website, 98% of cell phone users would save money on their network, and the average monthly bill is $21. If your driving a 15 year-old beater, you don’t need the comprehensive or collision coverage.


Of course, that would be part of a much bigger lifestyle change, but it’s part of the equation. I don’t know if we really have $30,000 worth of stuff to replace if we got cleaned out by burglars or if there was a fire. Dramatic downsizing or minimalism (or just not covering your belongings) would be ways to knock this expense back. We could get more calories for our buck if we went heavier into the carb-dense but inexpensive staples like potatoes, pasta, and rice. Maybe we can share it on The Side Hustle Show — because a dollar saved is a dollar earned. I normally like to use the credit card whenever we can to earn the points, but I’m sure there was also a few hundred in cash spending on food as well. It would almost never actually provide any benefit, unless something truly catastrophic were to happen.
Think that’s a steep enough penalty to get healthy people to buy into this ridiculously expensive private system? Everyone wants a side hustle to cover their rent, but why not start with a utility bill or cell phone bill? On the flip side, that retirement would also create a new opportunity to move to a lower cost of living area, so maybe the additions and subtractions balance each other out — or weigh more heavily in one direction. It depends on how much you plan to spend, and the easy way to calculate it is to multiply your annual spending by 25.
Instead you can focus on being of value — and when you do that, money has a strange way of following.
Share the results in the comments below, along with any opportunities you found to reduce your expenses and how your side hustle goals factor into the outlook. Feel free to hit me up with any questions either by email (nick at sidehustle nation [dot]com) or in the comments below. Sometimes we get caught up in what we make, but it’s what we spend that makes a bigger difference. I’ve never thought about how to calculate the Retirement Number (no doubt my better half has it tattooed somewhere). With an extra 50-hours a week of work + commuting time, I imagine most people could come up with some sort of income-generating hustle! 15.6% is a big difference from 30% so its always good to plan appropriately…might even shave a few years off of life in the rat race! I owned a large home, drove a big car, had a big portfolio, etc, etc, in the Excited States for many years. But, after drastic downsizing, I came to see that many of the big so-called luxuries I thought I needed, were really burdens more than blessings. I write and help people and companies with their internet marketing and enjoy Western pay while living in 2nd and 3rd world countries on their reduced cost economies.
I plan to learn more ways to make money on the side and cut down on my expenses, maybe that can cut down the time I need to save for my retirement fund my half, hopefully.
Isn’t it such an awesome feeling when your side hustle is covering your expenses and your entire paycheck from work is just gravy?
That is a significant chunk of change when you consider that we are all spending $100+ per month or more that we don’t need to spend.
At the end of the day I think we’d all rather have that than a few more dollars in the bank. If you can learn to live lean, you don’t put as much pressure on yourself to make a ton of money. If I’d have known a lot of this stuff before, I would not have had to wait for so long. But assuming my current situation stays the same and saving you breakdown – my current goal is ?1,200 or $1,800 a month (assuming I can shed my car hustling from home).
So I work TaxCaster to see what the maximum IRA withdrawal is I can make with zero federal taxes. Oh and we have $50,000 already set aside, not included in our IRA’s for our Travel Fund.



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