Recalculated: How to achieve financial independence

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When exactly is one financially free? That depends on several factors, including

how high your monthly expenses are
how much monthly profit you want to make on your share portfolio,
how much money you can invest over what period of time,
and which investment strategy you want to pursue.

As described above, the strategies can be divided into active and passive. In addition, each person needs a very individual additional amount of money to be truly financially free.

We try to take all these factors into account in our various calculation examples.

These costs are incurred

In order to get a realistic picture, however, other factors besides these must be taken into account in the calculation. However, some of these are so individual that we cannot take many of them into account in our calculations.

These factors include:

1. taxes

Taxes are also incurred in securities trading. These include the final withholding tax of 25% by default on all investment income earned (interest, dividends, gains from the sale of shares, etc.).

If your personal tax rate is lower, the final withholding tax applicable to you can be adjusted accordingly. In addition, you can claim an annual tax allowance of EUR 801 (or EUR 1602 for married couples), but this applies to all interest income at each financial institution together.

Due to the various possible scenarios, we completely ignore the final withholding tax in our portfolio calculations - as well as any church tax and soli that may be due.

2 Trading and custody fees

The costs incurred by custodian providers and stock exchanges can significantly reduce the actual investment amount and thus the potential return.

Exactly which fees are incurred and how high they are varies greatly from broker to broker and custody account model to custody account model and also depends on the selected asset (share, fund, ETF) and the trading venue.

These costs include

Order costs
Brokerage fees
Stock exchange fees
Custody/account management fees
Custody fees (usually 0.5% p.a. for deposits of EUR 100,000 or more)
Administration costs for managed assets (e.g. transaction costs for adjustments or rebalancing)

As there are also considerable differences here, we cannot take these costs into account in the calculations either.

3 Inflation

The value of money is continuously devalued. On average, an annual inflation rate of 2% applies. This value should always be taken into account, as a portfolio is only profitable when it generates a return of over 2%.

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Calculation examples for different scenarios

Every investor in how to verify exness account is different and can achieve financial freedom in different ways and at different times. We therefore look at general scenarios for earning an additional EUR 500 or EUR 5,000 per month with a share portfolio. We take into account the inflation rate of approx. 2 %, the full tax allowance of EUR 801 and the final withholding tax of 25 %, which has been soli-exempt for most investors since 2021. We analyse the direct and future payout in the case of a one-time investment, as well as the savings plan with accumulating securities.