RPF0550-How_Much_Does_It_Cost_You_To_Live_Today
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00:00:29.800 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:00:36.240 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:40.840 | building a plan for financial freedom in 10 years or less.
00:00:44.720 | My name is Joshua and I am your host.
00:00:46.600 | I am your fellow journeyman, fellow voyager down this path towards financial freedom.
00:00:52.120 | And I want to share with you some things that I have found useful in my own quest for financial
00:00:56.960 | freedom.
00:00:57.960 | Specifically today, I want to talk to you about the number.
00:01:03.320 | But I want to talk to you about the number in a way different than usually this subject
00:01:07.560 | is addressed.
00:01:10.280 | Most commonly when people think about the number, they think in terms of how many millions
00:01:16.440 | of dollars do I need in order to be financially independent.
00:01:22.040 | There's a place for that.
00:01:23.880 | But the trouble is we have a hard time conceptualizing millions of dollars.
00:01:30.240 | Very few of us have ever seen a million dollars.
00:01:32.640 | We very rarely held a million dollars in our hands.
00:01:36.280 | Very rarely do we have the ability to grasp what the time and the effort were that were
00:01:44.640 | needed in order to accumulate a million dollars.
00:01:48.880 | And so most commonly this millions of dollars number floats into your brain, usually at
00:01:56.280 | the input of some financial advisor or some financial writer, and then it floats right
00:02:02.360 | out again because it is a number that's hard to grasp.
00:02:06.440 | Well, I'm a simple man and I like to keep things in a way that I can grasp.
00:02:14.200 | So here's something that I have done over the years.
00:02:16.800 | I've taken my numbers and I've translated them from millions of dollars into the smallest
00:02:23.760 | unit that I can conceive of, the smallest practical unit.
00:02:31.640 | For me, that most useful number has been daily expense.
00:02:38.240 | Certainly there's a place for monthly expense and annual expense, and I use those all the
00:02:41.560 | time when I do financial planning.
00:02:42.920 | But a daily number is really interesting because it comes and goes every day.
00:02:51.080 | Number of years ago in my own quest towards financial freedom, I sat down with a spreadsheet
00:02:54.920 | and I took all of my expenses and I consistently built a column in my spreadsheet that would
00:03:01.240 | translate those expenses into a daily number so I could look at them and analyze them.
00:03:06.120 | Let me give you a simple example.
00:03:07.960 | How much does it cost you to house yourself and your family on a daily basis right now?
00:03:15.960 | Pause for a moment and think about how much it costs to house you and your family on a
00:03:22.440 | daily basis.
00:03:24.920 | Let me give you an example.
00:03:26.280 | Let's assume that your rent payment is $1,800 a month.
00:03:32.120 | That would be, that's about the median rent where I live.
00:03:35.680 | Your area may be higher or lower, but let's just use $1,800 a month.
00:03:39.240 | I like to divide by 30, so take $1,800 and divide by 30 and you come up with a number
00:03:43.720 | of $60 per day.
00:03:46.960 | So it costs you for your rent payment $60 per day.
00:03:52.680 | Now of course you have other utilities that are associated with your housing expenses.
00:03:56.960 | Perhaps you have an electrical bill.
00:03:58.640 | Perhaps that bill is $150 per month.
00:04:01.040 | Well if that's $150 per month, then your electrical bill is $5 per day.
00:04:07.660 | Perhaps you have a water bill that's also $150 per month.
00:04:10.180 | Well if so, then you're paying $5 per day for your water bill.
00:04:15.440 | Perhaps you have a utility, a cable bill, an internet bill, and perhaps that bill also,
00:04:20.520 | everything combined is $100 per month.
00:04:24.080 | Well now you know that your daily cost is $3.50 per day.
00:04:30.900 | You can do this with any other numbers that you have.
00:04:34.320 | For example, if your lawn service is $100 per month, well now you know it's a little
00:04:38.200 | under $3.50 per day, and you go down your numbers.
00:04:41.160 | But let's just stick with those four simple numbers that I've chosen.
00:04:44.720 | In fact, I'm going to round up.
00:04:46.040 | I'm going to say that your TV and your internet comes out to be $150 per month, so that's
00:04:50.640 | an even $5 per day.
00:04:52.440 | After all, audio math is generally better when we do $5 numbers instead of $3.33.
00:04:58.800 | If you add that up, your rental cost per day is $60 per day, your electric cost is $5 per
00:05:03.640 | day, your water cost is $5 per day, and your TV and internet is $5 per day.
00:05:08.280 | Totals $75 per day.
00:05:11.960 | $75 per day is what it costs you to live there.
00:05:16.920 | Now there are a number of ways that you can take this number and you can expand on it.
00:05:20.560 | So you could look at your income and you could say, "How many hours of work does it take
00:05:24.040 | me to earn $75 after taxes?"
00:05:28.520 | That's a useful thing to know.
00:05:31.000 | But you can also take this and look at it and say, "Well, how could I replace that $75
00:05:36.600 | per day?"
00:05:39.520 | As an entrepreneur, I've often found it easier to think of ways to make $75 per day than
00:05:46.000 | to save the large number that I would need in order to pay for the $75 per day from investments.
00:05:58.440 | That number would be about just under $700,000.
00:06:02.120 | I think this also shows my own personal bias towards entrepreneurship as a path towards
00:06:06.080 | freedom.
00:06:07.080 | Not that entrepreneurship is easy, but most experienced entrepreneurs would say that it's
00:06:11.240 | easier to figure out a way to earn $75 a day from a reasonable, pleasing business that
00:06:18.740 | adds value to your neighbors than it is to work and save just under $700,000 to provide
00:06:24.120 | for that with investments.
00:06:28.320 | But here's what I want to home in on.
00:06:31.280 | If you think about the number in terms of $75 per day, let's assume that you can square
00:06:35.460 | away the income.
00:06:37.460 | How could you arrange your lifestyle to get the most value from that $75 per day?
00:06:46.160 | What could you do?
00:06:50.480 | This was a calculation I did a number of years ago when I first thought of taking an RV trip.
00:06:54.880 | I announced on the show a number of months ago that my family and I are going to be heading
00:06:59.280 | off on an extended tour of the United States.
00:07:01.160 | We were delayed a few months beyond when I intended to leave, which is why I've been
00:07:04.960 | quiet about it on the show, but we are leaving here in June.
00:07:08.920 | In very short order, most of our house is empty, most of our stuff is gone, we're storing
00:07:13.400 | most of our things on Craigslist.
00:07:15.580 | And so in very short order, my family and I will be on the road and I'll be speaking
00:07:19.340 | to you from the road.
00:07:21.440 | And I'll share with you a little bit more about that journey along the way.
00:07:23.640 | I'm not going to turn Radical Personal Finance into the RVing the United States podcast,
00:07:28.120 | but I will try to share with you some of the experiences to tell you what I thought before
00:07:33.520 | the trip and what I've learned from the trip.
00:07:36.680 | But the financial feasibility of this lifestyle is really compelling if you stop and think
00:07:41.040 | about it on a per day cost.
00:07:46.080 | Here's the major problem with going on vacation.
00:07:50.560 | All of the costs of vacation are added to your normal monthly budget.
00:07:57.320 | So most people have a housing budget of $75 per day, their rent, the utilities, etc.
00:08:02.880 | And if they go on vacation, that $75 per day doesn't disappear.
00:08:07.160 | It stays the same, except it gets all of those vacation expenses added to it.
00:08:15.400 | So now we add hotel expenses, say $150 a night.
00:08:19.160 | You add eating out expenses, say $75 per day.
00:08:22.520 | You add entertainment expenses, other various expenses, and all of a sudden you're at $250,
00:08:26.880 | $300 per day.
00:08:28.860 | Which is where the average family then says, "Well, I can afford a 10-day vacation at $300
00:08:32.960 | per day, and that's a total of $3,000.
00:08:34.620 | There goes my vacation budget."
00:08:37.640 | But if you just simply swap one set of $75 per day expenses for a different set of $75
00:08:43.840 | per day expenses, all of a sudden now you can live a different lifestyle and experience
00:08:52.120 | financial freedom.
00:08:53.120 | And you don't have to wait until you have millions of dollars in the bank.
00:08:55.560 | You just need to figure out how to solve that $75 per day nut.
00:09:00.240 | Now let me give you an additional example.
00:09:02.360 | Let's say that you were renting in the circumstances that I discussed, and you had no money, no
00:09:07.720 | assets, but you were just looking to live a different lifestyle on a $75 per day budget.
00:09:13.620 | How could you do it?
00:09:15.560 | Well, you could approach it with the RV lifestyle.
00:09:19.780 | This is of course what many retirees do.
00:09:21.440 | There are many people living on Social Security as their only income source, living in RVs.
00:09:25.560 | And many people who dream of retirement talk about traveling.
00:09:28.440 | It's a major dream for most people.
00:09:31.120 | Whether it is for you, doesn't matter.
00:09:32.640 | You insert your own dream.
00:09:34.100 | But at least understand how it can be done.
00:09:37.980 | The average cost to stay in something like a national park comes out to about $30 a night
00:09:42.160 | if you stay in a national park or state park campground.
00:09:45.360 | Sometimes you can find them for 20, sometimes you can find them for more, but about 30 bucks
00:09:48.400 | a night.
00:09:49.400 | If you stay in private RV parks, it becomes a little bit more.
00:09:52.720 | What you get for that fee, that $30 per night, is a place to park your rig, an electrical
00:10:02.240 | hookup, a water hookup, and a sewer hookup.
00:10:07.160 | So you could look at your at-home electric bill of $5 per day, and you could look at
00:10:12.520 | your home water bill of $5 per day, and you could look at your home TV and internet bill
00:10:16.520 | at $5 per day, although the internet in most RV parks is pretty bad.
00:10:21.360 | And you could say, "Okay, well, there's $15 per day to stay at home.
00:10:24.320 | That's half of my $30 per night cost to stay in a national park.
00:10:27.780 | What about the other half?"
00:10:29.560 | What's a place to park your rig so you need something to sleep in?
00:10:34.080 | Let's assume for a moment that you were just going to stay in parks, and you just needed
00:10:37.800 | something to sleep in.
00:10:39.240 | So you went and you spent $30,000 on an RV, and because you didn't have any money, didn't
00:10:44.520 | have any assets, you borrowed the full $30,000, and you have a monthly payment now of $350
00:10:49.760 | per month.
00:10:50.760 | Well, $350 per month divided by 30 comes out to a little under $12 per day.
00:10:58.840 | Maybe you need something to tow that with.
00:11:01.640 | You bought a trailer for $30,000, and you need something to tow that with, and so you
00:11:06.240 | buy another tow vehicle, and it comes out to $12 per day.
00:11:10.600 | Well, now look what you've done for yourself.
00:11:13.540 | You have $24 per day of vehicle payments, and you have about $30 to $40 per day of RV
00:11:20.080 | park payments, and now you're right at about that $65 per day, $55 to $65 per day number
00:11:28.120 | for RVing.
00:11:32.400 | Very similar numbers to staying at home, but by looking at it under daily cost, you're
00:11:37.280 | substituting your own personal expenses and just simply changing the nature of them.
00:11:47.600 | Now I'm not advocating that you do this plan.
00:11:49.680 | I recommend that you don't borrow money for a trailer or a vehicle, but you got to say
00:11:54.360 | at least it's probably better than what most people do.
00:11:58.120 | After all, if you're paying rent, it's a complete cost.
00:12:00.560 | If you're making payments on an RV or a boat or some other form of living accommodation,
00:12:07.360 | at least possibly you own something and you have a little different lifestyle.
00:12:10.840 | I don't think it would be a crazy decision to make.
00:12:13.680 | I personally would do it on the cheap, and I would use the money I had because if you
00:12:16.640 | do that, it all of a sudden changes everything because now your daily costs can plummet,
00:12:22.200 | and you don't have to stay in RV parks.
00:12:23.560 | You don't have to stay $30 a night.
00:12:25.040 | There's some people that never pay for a place to park their RV.
00:12:28.440 | You have to invest in infrastructure.
00:12:31.760 | You'd invest in your own power systems, your own waste disposal systems, et cetera, and
00:12:35.360 | you can do the same thing on a house.
00:12:36.400 | You substitute a monthly payment for infrastructure equipment that handles that need.
00:12:42.600 | But calculate your dollar per day cost.
00:12:46.440 | Now you can do this in other ways as well.
00:12:47.840 | One of the interesting stories I heard a number of years ago, I read a profile of a very wealthy
00:12:52.560 | man.
00:12:53.560 | I forget how he made his wealth, but he was extremely wealthy, but he also had a bent
00:12:58.080 | towards non-consumption or towards a form of minimalism.
00:13:02.080 | In short, he had seen how the ownership of many items didn't become a blessing.
00:13:07.440 | It became more of a weight.
00:13:09.920 | And so this mega wealthy man lived full time in luxury hotels.
00:13:16.360 | That was the decision that he made.
00:13:19.660 | He only stayed in luxury hotels and he just substituted living the luxury hostel lifestyle
00:13:25.880 | for owning houses and apartments and things like that all around the world.
00:13:29.920 | Well, if you actually run the math on that, it can be a pretty powerful proposition.
00:13:37.100 | Staying in hotels full time, even at retail rates in luxury hotels.
00:13:43.700 | Let's say you're spending, I don't know what luxury hotels cost in your neck of the woods.
00:13:47.600 | Of course, they could be thousands, but let's say you're spending $300, $350 a night.
00:13:53.200 | Multiply that on a monthly basis, that's only, that's $10,500 a month.
00:13:58.080 | Certainly that's a luxury lifestyle, but that luxury hotel cost includes your place to stay,
00:14:04.520 | your bed to sleep in, your maid to clean things up, your groundskeepers to keep the place
00:14:08.680 | looking beautiful, your electricity costs, your water costs, your internet costs, et
00:14:13.240 | cetera.
00:14:14.240 | It's all in.
00:14:15.240 | You're just substituting one set of daily expenses for another set of daily expenses.
00:14:19.360 | Isn't this useful to you?
00:14:23.120 | So here's my charge to you.
00:14:25.860 | Take this idea and sit down with your own monthly budget.
00:14:28.500 | Work out what your dollar per day cost is.
00:14:30.800 | And then ask yourself, am I happy with how I'm spending this?
00:14:36.720 | Don't worry about the millions of dollars that you need.
00:14:38.480 | Just look at the daily costs that you need.
00:14:41.260 | You can solve millions of dollars later.
00:14:44.840 | But today, just work on the daily costs.
00:14:47.760 | What could you do to provide for yourself an income so that you can live on the per
00:14:52.840 | day structure that you find most helpful?
00:14:57.400 | Sit down and figure out what those numbers are because all of a sudden, the payments
00:15:00.420 | that seem so small on a monthly basis, when you put them on a daily basis, all of a sudden
00:15:07.840 | I have found that those payments are much more significant.
00:15:12.200 | Many people will spend without thinking much about it $100 a month on something like a
00:15:16.640 | phone.
00:15:17.640 | Well, that would be a normal expense for many people.
00:15:21.160 | But I don't know about you, but I always think twice about handing over a $5 bill.
00:15:27.880 | It's not that I can't hand over a $5 bill, but if I were handing over a $5 bill every
00:15:32.200 | day, 5 times 30 would come out to be 150, so just using round numbers again.
00:15:36.560 | If I were handing over a $5 bill every day, all of a sudden I would pay attention.
00:15:42.360 | But I'm less inclined to pay attention to that monthly number.
00:15:47.640 | Sit down, look at your budget, convert your numbers into daily expenses, and analyze that
00:15:52.440 | data and see if you are happy with how you're spending it.
00:15:59.000 | Thank you for listening.
00:16:00.000 | You've honored me with your time and attention, and I'm grateful for that.
00:16:04.220 | And I hope that I've effectively served you today with some ideas and strategies and tactics
00:16:09.040 | and techniques and tools that will help move you towards your goals.
00:16:13.760 | Before you go, three simple requests.
00:16:16.160 | 1.
00:16:17.160 | If there's an idea that's been helpful to you in today's show, make a plan to take action
00:16:22.440 | on it.
00:16:23.920 | Listening does lead to learning, but learning in and of itself doesn't automatically lead
00:16:29.340 | to a life change.
00:16:31.680 | It's action that leads to a life change.
00:16:35.660 | So take action.
00:16:37.360 | 2.
00:16:38.680 | Take something that was helpful to you in today's show and share it with somebody that
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00:16:44.560 | I'm depending on you to be a co-laborer with me in helping me to propagate the message
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00:16:54.200 | That helps the person that you are engaging with, and it also helps you because teaching
00:17:00.040 | others is one of the most effective ways for you to learn and for you to cement your learning.
00:17:06.880 | 3.
00:17:08.120 | If there's an idea that's been specifically helpful to you, and if you're gaining financial
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