Category Archives: The Number

It’s NEVER going to be enough!

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Pick a number: $1 million, $10 million, $50 million.

It’s NEVER going to be enough …

You see, when you get to whatever number you pick in advance as being THE NUMBER you will find that your expenses magically jump up to meet it … or worse, beat it …

Why?

Before you make the number, you are thinking like a [plug in your favorite means to scrape enough money to subsist on: employee, small business owner, plumber/electrician/doctor/lawyer/accountant].

This means that you are dragging in your [plug in your subsistence salary here: $30,000, $50,000, $100,000, $200,000] …

… which just happens to be barely enough to pay your current [plug in your vices here: food, mortgage, car payments, plasma TV payments].

So, getting to [plug in your “I’m really rich’ number in here: $1 million, $10 million, $50 million] really would make a difference … in your mind!

You see, your current lifestyle isn’t your ‘dream lifestyle’, as soon as you improve your Net Worth your dreams also go up!

That means that your $120,000 apartment suddenly becomes $350,000 when you have $1,000,000, then it becomes $1,500,000 when you have $5,000,000 and so on …

Your $5,000 chevy at Just Over Broke becomes a $35,000 Cadillac CTS at $1,000,000, and a $120,000 Maserati Gransport Spyder (oh, yeah!) at $5,000,000.

A better way is to work backwards: decide how much you need to earn each year to finance the life of your dreams (more on this in a later post) and multiply by 20 and that is The Number for you.

The answer will probably scare you into action (it’s the reaction I’m hoping for!) or to death (bummer), but, always keep that Number in mind when deciding what ‘rich’ means to you …

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How much does it take to be rich?

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My 10 y.o. daughter asked me exactly that question the other night … actually, she simply asked “are we rich”? I’ll tell you how I answered in a minute, because it is important that you understand how YOU would answer this question.

In the meantime, and by coincidence, I came across this blog just yesterday: http://www.millionairecorner.com/content/blogsection/4/110/

It’s written by Spectrum who did some research on what it takes to be rich …

How Rich is Rich?

 http://getrichstayrich.net/introduction/index.html

The problem is that they asked people who were already Rich!

 So, most said $5 million (what? net worth? in the bank? under the mattress?), but some said as much as $25 million. I would guess that this was related to how much money they made … the more they have, the more they spend, so the more they believe it takes to be ‘rich’.

Only 1 in 5 said $1 million, which is what many people just starting on the road to wealth would believe means ‘rich’ … when you get to $1M tell me if you’re ready to retire (I’ll bet the answer is NO!). 

I think the number is somewhere between $100 million and $1 billion …

… as one Billionaire said recently, after his company stocks grew five-fold in less than 12 months moving him from $1 Billion to $5 Billion net worth: “once you get past the first Billion the rest doesn’t matter.

So, how did I answer my daughter?

I said: “we are not ‘rich’ we are wealthy, because we can afford to live the same way that we are living now for the rest of our lives”. 

Now, we aren’t slouches (nice house in a great suburb, the ‘right’ cars, schools, vacations, etc.) but we have no helicopters or Lear Jets …

So, to determine when you are ‘rich’ you first need to determine your Number … that is the amount of money that you need to have ‘in the bank’ (actually in Passive Investments : bank accounts, investment properties, stock market … anything that makes YOU money even while you are asleep) to produce enough income for you to live your current (or desired) lifestyle for the rest of your life (which means, the amount has to be indexed for inflation).

I’ll show you how I worked through this in a future post!

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