RPF0684-How_to_Set_Financial_Goals_Part_3_-_Count_the_Cost
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00:00:29.960 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,
00:00:35.640 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:39.960 | building a plan for financial freedom in 10 years or less.
00:00:43.240 | Today in the show we continue our financial goal setting series, how to set financial
00:00:47.320 | goals and we're going to talk today about counting the cost.
00:00:52.600 | Before you start something, you've got to count the cost and don't begin until you count
00:00:58.360 | the cost.
00:00:59.600 | For who would begin construction of a building without first calculating the cost to see
00:01:03.520 | if there's enough money to finish it?
00:01:08.160 | There are two components that I want to talk to you about today, the financial cost and
00:01:12.040 | the opportunity cost.
00:01:13.560 | But basically it works like this.
00:01:15.520 | When you set a goal for yourself, that goal is going to involve a price tag in order for
00:01:21.240 | it to be achieved.
00:01:22.880 | In the first show in the series, I used the quote by oil billionaire H.L. Hunt who famously
00:01:28.640 | said that in America you only need the two things to be successful.
00:01:32.160 | First to decide exactly what you want and then second to determine the price you're
00:01:37.600 | going to have to pay to get it and then to resolve to pay that price.
00:01:44.400 | And goal setting is as simple as that.
00:01:47.400 | You decide what you want, you determine the price that you'll have to pay to get it and
00:01:52.240 | then resolve to pay that price.
00:01:54.300 | Now that quote as I applied it in the first show in the series is well applied to any
00:01:58.880 | goal, even those goals that have only a peripheral connection to finances.
00:02:04.200 | Something like I want to lower my body fat by an extra 50 pounds.
00:02:09.700 | You count the cost of what's going to have to be required and you do it.
00:02:13.240 | And although there may be some financial component to it, perhaps changing the amount of money
00:02:18.840 | that you spend on food or perhaps purchasing some kind of coaching or exercise, access
00:02:25.000 | to a gym, something like that.
00:02:26.660 | Those costs are more peripheral.
00:02:29.380 | But most of our goals involve costs that are more direct.
00:02:35.240 | Much more direct.
00:02:36.820 | Our goals could be things like consumption goals.
00:02:39.580 | Let's say you decide I would really like to buy a different car.
00:02:43.900 | I'd really like to buy a new car.
00:02:46.380 | And so you clarify the type of vehicle that you want to buy and then count the cost.
00:02:51.380 | I would recommend to you that the first thing you should do is trot out and start doing
00:02:55.560 | research on the car.
00:02:56.620 | Go to the dealership if there's one handy to you.
00:02:59.660 | Sit in the car, look at it, get the brochures and go through them and find out what it costs
00:03:04.960 | because then you can know what this thing is going to cost me if I set this as a goal.
00:03:09.940 | You need to know that.
00:03:11.580 | And that experience can be useful.
00:03:12.700 | If you want to buy a house, whether it's a new house to live in of a certain quality
00:03:16.780 | or variety or whether it's a rental house of some kind, then you need to go out and
00:03:22.260 | start looking at the houses.
00:03:23.620 | You can do this digitally.
00:03:24.620 | Look around your county and see what houses cost.
00:03:27.960 | See what they're going to rent for.
00:03:29.760 | Go out and drive around and look at some.
00:03:31.380 | Go to some open houses.
00:03:32.380 | Tour some homes, etc.
00:03:34.140 | Knowing what something costs is a basic first step because then by having those numbers
00:03:38.860 | in your head, you'll start to understand what's required.
00:03:44.900 | Now you might find a pleasant surprise.
00:03:49.060 | One of the things that I find fascinating in some of the work that I do is how many
00:03:53.300 | people have big dreams about what they want to do and yet when they start counting the
00:04:00.140 | cost of that, actually financially counting the cost because they start to move forward
00:04:03.560 | towards that goal achievement, they find out that to achieve that certain thing can be
00:04:08.060 | far cheaper than they ever imagined.
00:04:11.900 | My favorite example here is travel.
00:04:15.020 | I've heard time and time again from financial planning clients, "When we retire, we want
00:04:20.260 | to travel.
00:04:21.260 | We want to travel the world."
00:04:22.420 | Awesome.
00:04:24.860 | But my experience, the vast majority of people who say they want to do that don't really
00:04:28.300 | know how much traveling the world costs.
00:04:31.820 | Now I'm not saying they don't travel, but they don't understand how much traveling the
00:04:34.980 | world actually costs because they're not actively doing it now.
00:04:38.980 | There's no reason why you have to wait until retirement to travel the world if you really
00:04:42.660 | want to travel.
00:04:44.240 | Day in, day out, you will find today in 2019, 2020, you will find couples traveling the
00:04:51.380 | world for less than $30,000 per year between the two of them, individuals less than $20,000
00:04:58.340 | per year.
00:04:59.340 | And that's not hyper budget travel.
00:05:02.740 | That might not be the most extravagant travel, might not always be staying at a five-star
00:05:06.700 | hotel travel, but it's not super budget travel either.
00:05:11.500 | And so if somebody wants to go and travel the world, it can be as simple as figuring
00:05:16.860 | out how to create an income that supports them on the road or simply saving the money.
00:05:22.220 | If you got a job making $40,000 a year and you can live on 20,000 and save 20,000, well,
00:05:28.500 | now you can go travel the world for a year.
00:05:30.940 | Or if you can figure out how to make an income of $55 a day from the road, you can afford
00:05:37.180 | to travel the world.
00:05:38.180 | There are all kinds of things you can do with just some hourly work online for $30 an hour,
00:05:43.220 | two hours a day of work on the road per day and your budget is met.
00:05:47.860 | Now you can go and travel the world.
00:05:49.860 | And so when you count the costs, sometimes you find that things are far cheaper than
00:05:53.460 | you ever imagined they would be.
00:05:56.340 | And that can be wonderful because it can help you to see how to achieve something much faster.
00:06:00.380 | Let's say my goal is to drive an exotic supercar.
00:06:04.980 | Well, the price tag might be $400,000 or you might look down and say, "How much does it
00:06:10.700 | cost for me to lease one?"
00:06:13.580 | Here you can lease a Lamborghini for under $3,000 a month.
00:06:17.420 | So if that's your thing, you may be able to accomplish it much faster when you start looking
00:06:22.100 | at options.
00:06:24.420 | Which of us hasn't actually experienced how effective the salesman is at trying to show
00:06:29.380 | us how we can get into that new car today?
00:06:32.260 | You go to count the costs, thinking about buying the new $65,000 SUV and all of a sudden
00:06:37.100 | you find out from your $682 a month you can be driving out today.
00:06:41.660 | Well, it's a lot easier.
00:06:43.220 | If you really want to drive that SUV, it becomes pretty easy when it's broken down into that
00:06:47.700 | monthly payment amount.
00:06:49.860 | You go and you look at the house and you count the costs and all of a sudden now you realize
00:06:53.780 | mortgage payment is $2,200 a month.
00:06:55.580 | I can afford that.
00:06:57.620 | So count the cost.
00:06:58.980 | Now we do need to stop in the middle of our decision making process and carefully use
00:07:04.980 | logic and analysis, see what we're giving up, etc. before we take action.
00:07:09.020 | We don't want to just be emotionally impulsed into doing something because it sounds easy.
00:07:14.420 | Talk about what you're giving up in a moment.
00:07:16.420 | But some things are dramatically cheaper to do than you would think and you know that
00:07:20.180 | by starting to count the cost.
00:07:22.380 | The image that just always sticks with me as the very best expression of this is Chris
00:07:27.820 | Guillebeau's story of when he sat down and decided to visit every country.
00:07:33.100 | Oh, I think it was that he wanted to start with 100 countries and he sat down and he
00:07:36.980 | was figuring out how much it would cost him to visit 100 countries and his calculations
00:07:42.300 | were that it would probably cost him about $33,000 to visit 100 countries.
00:07:48.040 | So he thought, "Well, that's not unreasonable.
00:07:51.540 | Lots of people buy $33,000 cars.
00:07:53.540 | I'd rather just simply visit 100 countries."
00:07:57.180 | So when you sit down and start looking at numbers and start pricing things out, start
00:08:01.460 | considering scenarios, you may quickly find out that something is far more achievable
00:08:07.420 | than you ever thought possible.
00:08:10.180 | So get that data.
00:08:12.100 | Look into it.
00:08:13.100 | Study it.
00:08:14.100 | Go online.
00:08:15.100 | Do your internet research.
00:08:16.100 | See what other people are paying for this goal that you've set.
00:08:19.220 | And you may be pleasantly surprised to find out that you can achieve a goal far faster
00:08:24.600 | than you ever thought.
00:08:26.140 | Incidentally, this is one of the reasons why it may be important to you to be careful how
00:08:31.060 | you set your goals.
00:08:32.980 | Example, you might set a goal, "I want to drive a new car.
00:08:37.260 | I want to buy a new car."
00:08:42.100 | But if you don't clarify how you want to buy the new car, you might wind up down at the
00:08:48.580 | dealership, drive out with the car and that new car could be a chain around your neck
00:08:51.600 | for the next six years until you get the payments paid off.
00:08:54.900 | What I like to do is, when setting goals, think about how I can comfortably afford to
00:09:01.280 | buy something fun without sacrificing my financial goals, especially my wealth accumulation goals.
00:09:09.700 | So what I like to do is if I'm going to have an extravagant consumption item, an extravagant
00:09:14.380 | consumption purchase, for me those things are usually more experiences rather than stuff,
00:09:20.620 | then I want to look at it and say, "How can I position this as a reward so I will simultaneously
00:09:25.740 | get wealthy and get this thing?"
00:09:30.940 | So just to get the image in your head, instead of saying, "I want to buy a new car," I would
00:09:38.740 | say, "I want to buy this specific car with the monthly profit from this new line of business,"
00:09:46.060 | or "I want to buy this specific car with the monthly profit from my new rental house."
00:09:53.780 | So my goal is now to buy a new rental house, get it rented out, with enough excess cash
00:10:00.380 | flow to pay the car payment for me on this particular car.
00:10:05.540 | Then while I'm driving the car, I can feel relaxed and enjoy the consumption expense
00:10:10.460 | knowing that I haven't sacrificed my wealth goals.
00:10:13.260 | Because when you start counting the cost of goals, you see that sometimes they interact.
00:10:16.380 | I want to be financially independent in 10 years, but I also want to drive a Lamborghini.
00:10:21.140 | Well, financial independence doesn't come from Lamborghinis.
00:10:25.660 | Lamborghinis might be part of your total financial abundance, but you first got to start with
00:10:30.380 | accumulating the money.
00:10:32.140 | And I would a whole lot rather have the Lamborghini after being financially independent than the
00:10:37.980 | Lamborghini first.
00:10:39.640 | Your mileage may vary, but count the cost and then stop and think and analyze.
00:10:44.020 | Now on the flip side, when you start looking at things, some things may cost way more to
00:10:49.340 | do than you would think.
00:10:51.800 | And you might just decide, "I'm not interested in this," in which case you can just toss
00:10:56.980 | it away.
00:10:58.660 | Years ago when I was younger, I really wanted to buy a Harley Davidson.
00:11:03.180 | I enjoyed riding motorcycles.
00:11:05.420 | I really wanted to buy a Harley Davidson.
00:11:08.060 | So I set it as a goal.
00:11:10.740 | By this date, I will own a black Harley Davidson.
00:11:14.420 | I specified it all out.
00:11:15.700 | I can't remember at this point.
00:11:16.700 | It was the Road King or something.
00:11:19.140 | I wanted to be a bagger on the back, but not the top case.
00:11:22.180 | I liked those.
00:11:23.180 | I rented one from the Harley Davidson dealership one time.
00:11:25.180 | I was like, "By this date, I'm going to have a Harley Davidson."
00:11:27.420 | Then I went, I counted the cost on it, and I opened the savings account with the name
00:11:31.120 | on the account, Harley Davidson.
00:11:32.980 | I started funding it.
00:11:35.500 | Over time, I just realized, "You know what?
00:11:36.940 | I don't actually care about this goal.
00:11:40.700 | This is not actually my goal."
00:11:41.860 | It was a consumption goal that somebody talked me into setting.
00:11:44.780 | I was reading some book, and they talked about setting goals.
00:11:47.540 | I put it as a goal, and I realized, "No, I don't really care about that."
00:11:51.500 | So I closed the account and moved the money elsewhere.
00:11:56.020 | That's really nice, because now you can just give up on a goal because, "That's not actually
00:12:01.220 | my goal."
00:12:02.980 | A lot better to know that quickly so that you can change quickly than to spend years
00:12:07.180 | chasing a goal that's not really yours.
00:12:11.240 | You might not choose to throw away a goal, but you might choose to modify a goal.
00:12:15.040 | For example, my Harley Davidson would have been absurdly expensive.
00:12:18.780 | I can't remember now, but maybe $25,000 for the exact top-of-the-line bike that I wanted.
00:12:24.720 | But there's no reason to buy a $25,000 bike if your goal is just to have a motorcycle.
00:12:30.180 | A $2,000 motorcycle would work great in most situations.
00:12:33.900 | You set the goal and realize, "It's just not worth it to me.
00:12:36.220 | I'm not willing to work and save and experience all the other costs of that $25,000 goal when
00:12:42.500 | I could have 80% of the benefit for $2,000."
00:12:46.220 | Some things cost way more than you think, and you can figure that out quickly when you
00:12:49.100 | start counting the financial cost.
00:12:54.160 | Count the cost.
00:12:55.160 | When you set a goal, count the cost.
00:12:58.640 | We've talked about the financial cost, but financial costs are not the most important
00:13:04.820 | costs.
00:13:05.820 | And the reason is because money is the ultimate renewable resource.
00:13:12.700 | You can always get more money.
00:13:14.340 | You can always create more money.
00:13:16.180 | You can almost always earn more money.
00:13:18.760 | So money is the ultimate renewable resource.
00:13:24.860 | But there's one other resource that is the ultimate non-renewable resource, and that
00:13:30.500 | is time.
00:13:32.700 | Time is the ultimate non-renewable resource.
00:13:36.620 | And time is usually what's involved in our second area of cost, which is the opportunity
00:13:43.700 | cost.
00:13:45.660 | What is the opportunity cost of your goal that you're setting?
00:13:49.900 | Opportunity cost is what are you giving up in order for you to pursue or to achieve this
00:13:56.980 | goal?
00:13:57.980 | What will you be giving up?
00:14:00.780 | Now these opportunity costs are a little bit harder to quantify, but they are no less real
00:14:08.300 | simply because they're harder to quantify.
00:14:11.500 | The fact that they're harder to figure out and harder to put a specific dollar figure
00:14:16.080 | on doesn't make them any less real.
00:14:19.500 | And as time marches forward, you'll find that you can't do everything equally well, so you're
00:14:24.100 | going to have to give something up.
00:14:29.140 | And as time marches forward, that's the non-renewable resource that you'll never get back.
00:14:34.820 | So when you set a goal, you've got to be very careful that you really believe in that goal
00:14:38.980 | and that that goal itself is not going to cost you something very important.
00:14:45.460 | For me, many of the consumption goals that I used to set, I put aside because what I
00:14:51.000 | realized I would be giving up was higher goals such as financial freedom or personal freedom
00:14:57.540 | or lifestyle freedom.
00:14:59.620 | I valued financial freedom more than I valued achieving the consumption goal.
00:15:06.500 | And frankly, that's basically the core basis of the modern FIRE movement.
00:15:13.900 | You have people who are basically looking at life and saying, "Well, I could have all
00:15:18.740 | these things or I could have all these experiences now.
00:15:23.900 | I could have these various consumption items.
00:15:28.620 | Or if I don't have these now, I could have financial freedom faster."
00:15:37.140 | And so, many people choose to lower their consumption because they want to be financially
00:15:43.300 | free faster.
00:15:46.260 | Now notice the balance here.
00:15:48.020 | What's the opportunity cost of pursuing financial freedom?
00:15:51.700 | Well, what you give up is you give up experiences now, you give up purchases now in exchange
00:16:00.380 | for things later.
00:16:04.060 | Is that a wise move?
00:16:06.940 | Probably depends on the person.
00:16:08.860 | Probably depends on their goals.
00:16:12.540 | Probably nobody gets it completely right.
00:16:17.340 | I think if you talk to most hardcore FIRE devotees, I bet you that some of them would
00:16:26.020 | look back and say, "I wish I had spent a little bit more here.
00:16:30.700 | I wish I had done that thing 10 years ago or 5 years ago instead of just saving, saving,
00:16:37.140 | saving all the time.
00:16:39.540 | Because now I look back and that's an experience I can't get back.
00:16:44.780 | Those are years that I can't get back.
00:16:48.620 | I can't go back and relive that time."
00:16:53.300 | But then of course on the flip side, what's much more widespread is you and I at least
00:16:58.740 | have probably experienced this and most of our neighbors have, that many people would
00:17:03.180 | say, "Oh, I spent lots of money on an experience or lots of money on a thing.
00:17:09.260 | I wish I could go back and get that back.
00:17:13.620 | I wish I had a little more freedom today by having a little more money in my pocket."
00:17:20.220 | I doubt any of us are going to successfully achieve that perfect balance.
00:17:25.820 | Probably doesn't exist.
00:17:28.300 | But at least by thinking about it carefully and consciously, hopefully we can get a little
00:17:34.560 | bit closer toward that ideal balance.
00:17:38.260 | And the way that you get there is by counting the cost.
00:17:40.580 | You count the financial cost and you count the opportunity cost.
00:17:44.140 | What will this goal cost me to achieve and what will I give up in order to achieve it?
00:17:52.140 | What will I have to stop doing in order to accomplish this goal?
00:17:56.580 | What will I have to stop spending money on in order to accumulate the money for this
00:18:01.300 | goal?
00:18:03.140 | What more work will I have to do in order to have the money for this?
00:18:10.700 | These concepts I'm giving you today are at the core of most of the modern financial conversation,
00:18:20.020 | especially the very loud financial conversation that much of this community is involved in
00:18:25.380 | relating to financial independence.
00:18:28.180 | As we sit here at the dawn of a new decade, or I guess the eve of a new decade would be
00:18:32.780 | more accurate, as we sit here at the eve of a new decade and consider forward 10 years,
00:18:38.220 | my goal is that this be the decade that you achieve financial freedom.
00:18:46.460 | That's my goal for you.
00:18:49.580 | So following this formula that I have given to you here, we have to talk about what does
00:18:55.620 | freedom mean to you?
00:18:57.180 | What does financial freedom mean to you?
00:18:58.940 | That's what is the financial cost of financial freedom?
00:19:05.060 | Your number may be rather modest.
00:19:08.260 | You might recognize that if you can accumulate $10,000, you'll be in the top half of probably
00:19:14.660 | Western society, at least American society, given that you could lay your hands on $10,000.
00:19:20.220 | Well, that's a very doable goal.
00:19:23.400 | Your number might be far higher.
00:19:25.620 | Your number might be $5 million, and your target is to lay your hands on $5 million
00:19:32.260 | in order to achieve financial freedom.
00:19:36.540 | There be numbers far higher, far lower, but sit down and count the cost of what financial
00:19:41.900 | freedom means to you.
00:19:45.060 | But then you have to sit down and think about the opportunity cost.
00:19:50.060 | What will I be giving up to achieve financial freedom?
00:19:56.500 | Now I'll just give you a little bit from my brain, a little bit from my story, and then
00:20:02.140 | you can use it as fodder to achieve whatever you want to achieve.
00:20:08.940 | And feel free to disagree with me, agree with me, it doesn't really matter.
00:20:12.300 | Just go through the process for yourself and then hopefully make some intentional decisions
00:20:16.580 | for your situation.
00:20:18.980 | But here's how I tackled this problem.
00:20:21.580 | For me, my target has always been financial freedom.
00:20:26.760 | I want to have financial freedom.
00:20:29.940 | That's the goal.
00:20:31.620 | Lifestyle freedom.
00:20:32.780 | Freedom is a big deal for me.
00:20:34.180 | Freedom in all of its variations and permutations.
00:20:37.420 | And so when I ask myself the why, why do I want financial freedom?
00:20:41.780 | Well, some of the things that happen for me, some of the things that are important to me,
00:20:47.340 | are things like freedom over my time.
00:20:50.460 | I like to be in control of my time.
00:20:52.940 | I like to feel like I don't have to be somewhere at a certain time.
00:20:56.140 | I like to feel like I don't have to go somewhere at a certain time.
00:20:58.900 | I like to have control over my time.
00:21:00.820 | It's always been a dream of mine.
00:21:03.300 | When I sit down and imagine my perfect day, my perfect day is never involved in the alarm
00:21:07.340 | clock going off.
00:21:10.380 | So control over my time.
00:21:13.440 | Other things that financial freedom means to me, means control over who I associate
00:21:17.780 | with.
00:21:19.240 | In my opinion, freedom of association is one of the most basic of fundamental human rights
00:21:25.480 | that most people never think to capture for themselves.
00:21:30.120 | And yet we all have it.
00:21:32.200 | Unless you're a slave in chains, you have freedom of association.
00:21:38.380 | One of the, I'll skip the rant, freedom of association.
00:21:43.780 | One of the things that's important to me is freedom of speech.
00:21:47.980 | The ability to say what I want to say and to be accountable for my words.
00:21:53.800 | Freedom of speech.
00:21:56.320 | So these are different aspects of freedom that for me are important.
00:22:03.280 | So now we come back to financial freedom.
00:22:05.120 | Goal, financial freedom.
00:22:06.280 | I have some numerical targets associated with that.
00:22:09.240 | But we start counting the cost.
00:22:10.400 | What is the financial cost of financial freedom?
00:22:16.160 | Let me use some numbers to put some math on this.
00:22:19.620 | In my opinion, the sweet spot for financial freedom is a starting point for an abundant
00:22:28.320 | and free financial life is somewhere between $6,000 to $12,000 a month.
00:22:36.080 | Median income in the United States, something in the $50,000 to $60,000 range.
00:22:41.040 | There's research that indicates that $70,000 is kind of a sweet point of happiness, of
00:22:47.680 | earnings, is a sweet point of happiness.
00:22:50.160 | From some perspective, after taxes, you wind up in that $5,000 or $6,000 a month range.
00:22:55.480 | I think many people can live comfortably on $5,000 to $6,000 a month.
00:23:00.120 | What you miss out on in that budget, and this would depend if you're a single person, married
00:23:03.640 | couple, married with children, what you miss out on that budget is some of the experiences
00:23:07.480 | that are really fun and expensive.
00:23:10.440 | The weekend trip to New York City to take in a show or two and enjoy the Christmas cheer
00:23:16.240 | in New York City.
00:23:18.460 | Is it totally extravagant?
00:23:19.960 | No, it's not that extravagant, but it'll still cost you $6,000.
00:23:25.360 | The week ski trip, the European vacation, the cruise, those kinds of things.
00:23:30.320 | If your tastes are simpler and they run to reading quietly around the firelight and book
00:23:37.640 | club discussions in downtown Toronto, etc., then of course you don't need as much money.
00:23:44.760 | If you have many children as I do, and if you really prefer the idea of time in Europe
00:23:52.120 | and Broadway musicals and taking your children on interesting experiences, etc., then of
00:23:58.600 | course you increase your budget numbers.
00:24:01.640 | But I think somewhere in that $6,000 to $12,000 a month range is really in many ways an ideal
00:24:08.360 | number for many people.
00:24:09.360 | I've done budget analyses.
00:24:10.860 | Most people don't ever sit down when counting the cost and talk about what they can actually
00:24:14.280 | spend money on.
00:24:15.280 | Years ago I did a show called Why You Should Probably Lower Your Financial Goals.
00:24:19.920 | Got a lot of great feedback from that show where I went through different budgets and
00:24:24.460 | talked about how when you get to the higher dollar amounts, it's actually really hard
00:24:28.220 | to spend money.
00:24:29.680 | Many people set very high financial goals without ever sitting down and thinking about
00:24:33.360 | what to actually spend the money on.
00:24:36.120 | Let's just say that your number is $8,000 a month as just a plug number here.
00:24:41.520 | You multiply 8 times 12 and you say, "My goal is to spend $96,000 per year and let's round
00:24:47.500 | it up to $100,000 for easy podcast math.
00:24:50.060 | My goal is $100,000 per year."
00:24:53.600 | Then you sit down and you begin with the 4% rule.
00:24:57.320 | Let's go with the 3% rule for safety.
00:24:59.040 | You multiply 100,000 times 30 and now you know your number is $3 million.
00:25:03.800 | Could be $2.5 million, could be $3 million, but you got a range and an expectation of
00:25:08.040 | how much money you would need to save to accomplish that particular goal.
00:25:13.280 | You look at your savings rate and you calculate.
00:25:15.240 | Maybe you're saving $3,000 a month.
00:25:19.280 | It's going to take you quite a while to get there at $3,000 a month.
00:25:24.560 | You start working on variations.
00:25:26.040 | Now, when I went through this for myself and I thought about what was important, I thought
00:25:29.680 | about the extreme savings.
00:25:31.800 | At the time that I first started working through this stuff, I had a high income, I had a good
00:25:36.480 | job, my own business, etc.
00:25:39.760 | But when I looked it through, I realized that for me, I didn't have to depend on purely
00:25:45.200 | finances just to accomplish freedom, but that for me, I could accomplish most of my why,
00:25:53.200 | my freedom, by just simply transitioning to a different kind of business.
00:25:58.400 | And that that could be a lot faster way of achieving what I wanted to achieve.
00:26:04.440 | That may not be the same for you.
00:26:05.820 | If you sit down and you look at your job and you say, "If I work this job for three more
00:26:10.000 | years saving at my current rate, I'll be in a situation where I can achieve my personal
00:26:15.540 | financial goals."
00:26:17.940 | In which case, a sensible position would be for you to work at your job.
00:26:21.520 | Now, remember, of course, also we could play with the investment numbers.
00:26:25.680 | You sit down and you say, "All right, in order for me to generate $8,000 per month, I would
00:26:30.840 | probably need in my local area, I probably need six rental houses.
00:26:35.760 | And if I had six rental houses paid off, then I could achieve that goal."
00:26:40.680 | So you start buying rental houses.
00:26:42.560 | But you calculate the number.
00:26:45.520 | You think about the why.
00:26:47.800 | Then you think about what you give up.
00:26:50.600 | So when I went through the opportunity cost analysis, realized that I could achieve financial
00:26:55.640 | freedom in a number of different ways.
00:26:58.360 | One way was by continuing in the business I was in at that time.
00:27:01.960 | And it wouldn't have taken that long for financial freedom, but it still would have been a number
00:27:05.820 | of years.
00:27:07.320 | Significant, not insignificant number of years.
00:27:11.480 | Well, when looking at it, here's the problem.
00:27:16.200 | Money is the ultimate renewable resource.
00:27:18.480 | Time is the ultimate non-renewable resource.
00:27:21.720 | If somebody really doesn't want to work and they want to be free, then of course, you've
00:27:26.880 | got to become totally financially free so you can live on the income from your portfolio.
00:27:31.760 | But if you just want something like I did with freedom, and you like working and you
00:27:35.800 | intend to always work, for me, I will always work.
00:27:39.360 | I'll never retire.
00:27:41.520 | Because I believe that work is important.
00:27:43.880 | Some of the most important contributions we make to the world are in our work.
00:27:48.120 | And so work will always work.
00:27:50.240 | Now if you work for money, great.
00:27:51.400 | If you don't want to work for money, don't charge money.
00:27:54.440 | That's your prerogative.
00:27:56.240 | But work is something I'll always do.
00:27:59.720 | And so I was able to achieve one level of financial freedom fairly quickly by seeking
00:28:06.680 | to build ways to earn an income and support myself through building a different business,
00:28:12.320 | a business that would allow me freedom.
00:28:14.840 | And I'm grateful to be able to do that.
00:28:17.240 | Very blessed.
00:28:18.400 | Talk with my wife frequently.
00:28:19.440 | Just last night we were talking about, I was talking to her about going into a different
00:28:23.120 | line of business and we were brainstorming it out.
00:28:25.800 | This other line of business could be extremely profitable.
00:28:30.920 | Something that I knew well.
00:28:31.920 | We were talking about opportunities and numbers, etc.
00:28:34.840 | I just said, "I can't give up the freedom."
00:28:39.240 | I cannot imagine a better situation than I have now.
00:28:41.960 | I'm not willing to give up the freedom.
00:28:43.800 | With all of the hardship, with all the things that are difficult at the moment, I'm not
00:28:47.320 | willing to give up the freedom in order to go back into less freedom in the other situation.
00:28:54.560 | Now don't copy me unless my situation is similar to yours, but do the analysis.
00:29:01.280 | I've done this type of analysis for people and the answer is, "Well, what I'll do is
00:29:05.920 | I'll keep a job as a firefighter or as a teacher or enjoy or work till I get my military pension."
00:29:12.720 | Because what I get is something valuable that gives me a baseline level of freedom and what
00:29:19.360 | I give up is not something that is particularly bad for me to give up.
00:29:23.920 | The opportunity cost for somebody who wants to be a firefighter, for example, I've always
00:29:28.540 | thought it's a pretty cool job, say, "What's the great cost of my being a firefighter?
00:29:33.840 | I like what I do.
00:29:35.080 | I like the schedule.
00:29:36.400 | I feel like it's important.
00:29:37.840 | I feel like it's a service.
00:29:39.520 | I enjoy the physical work.
00:29:41.680 | Gives me a great income now that I have lots of time to enjoy.
00:29:44.800 | I get a great pension, which really helps my plan for financial independence and financial
00:29:49.800 | freedom."
00:29:50.800 | It's a wonderful thing.
00:29:52.240 | And so I give up a little bit of freedom now.
00:29:54.160 | I give up a little bit of flexibility now, but I get all these other benefits.
00:30:00.560 | Go for it.
00:30:02.640 | Do your own analysis.
00:30:04.460 | But as you work through this process, this is the analytical process that you can apply
00:30:09.160 | to your own situation to try to come up with the best solution for you.
00:30:14.040 | Set a goal.
00:30:15.840 | Dream a big dream.
00:30:17.880 | Think about the price you'll have to pay for that dream.
00:30:20.580 | And the clearer that you can get that goal, the clearer you can get that dream, the easier
00:30:24.440 | your plan will be.
00:30:26.740 | Think about why this is important to you.
00:30:30.760 | If your why is big enough, I can promise you, you will find a way to achieve it.
00:30:35.840 | Then think about different how, different levels of how.
00:30:39.840 | How can you do this?
00:30:40.840 | What are the opportunities that you have?
00:30:43.160 | How can you do this in a more efficient way?
00:30:45.680 | How can you do this now?
00:30:47.040 | Get your creative juices going.
00:30:49.900 | Count the cost carefully.
00:30:52.880 | Count the financial cost.
00:30:54.680 | Work through different ways of looking at it.
00:30:57.520 | Look at the budgets.
00:30:58.640 | Think about the math.
00:31:00.800 | And count the opportunity cost.
00:31:02.820 | What will you have to give up by pursuing this goal?
00:31:08.400 | Then we work towards the next step.
00:31:14.680 | But that will be in another show.
00:31:16.760 | As I go today, I want to make an announcement and give you a plug here.
00:31:20.360 | Over the last couple of weeks since my Black Friday sale, I've been totally inundated with
00:31:24.960 | doing consulting work.
00:31:27.360 | And it has been awesome.
00:31:29.840 | Really really awesome.
00:31:32.280 | I forgot how much I enjoyed doing financial planning and consulting.
00:31:37.280 | With a lot of extensive travel, new children and whatnot, I couldn't keep a calendar.
00:31:41.200 | And I'd have people reach out to me like, "I'm sorry, I can't even commit to a calendar
00:31:44.920 | appointment because everything was just so haywire."
00:31:47.360 | But at this point, I've gotten my life back onto a smooth, more disciplined track, etc.
00:31:52.960 | Things are functioning very smoothly and so now I can keep a calendar.
00:31:56.240 | And so as I've opened this up, it's been just awesome.
00:31:58.980 | It's been absolutely awesome.
00:32:01.640 | And I so enjoy it.
00:32:03.520 | You are the best listener in the world.
00:32:07.320 | I've got the coolest listeners.
00:32:09.120 | I'm frankly intimidated by so many of you.
00:32:13.040 | And I wonder like, "Why is this person coming to me?"
00:32:17.680 | I just want to, you know, I always give one of my pieces of advice is go to people and
00:32:22.680 | ask them for advice and ask them what's worked for them.
00:32:26.800 | And more than half of my consulting clients, my impulse is just to say, "Listen, can I
00:32:32.160 | interview for Radical Personal Finance so I can share your story with the world because
00:32:36.400 | we want to learn from you.
00:32:37.400 | I don't have anything to teach.
00:32:38.440 | Let's just learn from you."
00:32:39.440 | It's been so great.
00:32:41.460 | But it's so energizing to me and motivating to me because I love it.
00:32:47.840 | So one of the decisions that I have made is here in 2020, I'm going to dedicate a significant
00:32:54.540 | part of my weekly schedule to doing some consulting work.
00:32:59.640 | And it's going to be a regular thing.
00:33:03.000 | And primarily for me, one of the biggest costs, back to opportunity cost, right?
00:33:07.120 | This still fits into the content of today's show.
00:33:09.240 | One of the biggest costs that I have found of leaving a more traditional corporate environment
00:33:14.880 | is the solitude.
00:33:17.760 | I don't want to use the word loneliness because I'm not lonely.
00:33:21.760 | I have a vibrant social network, a vibrant family life.
00:33:24.920 | I'm not lonely.
00:33:26.600 | But it is a form of solitude and I miss the camaraderie of the office environment.
00:33:32.960 | I miss the, I miss it.
00:33:36.080 | I miss that sense of being on a team, that sense of purpose.
00:33:39.280 | Now, of course, I'm leading my own team and seeking to build that.
00:33:43.060 | But because I've chosen to do what I do virtually, I don't get to enjoy those same benefits
00:33:47.640 | of the coffee pot chatter and things like that.
00:33:51.180 | It's really a big benefit of working.
00:33:53.040 | My sister, you always used to say that she went to work just to see her friends every
00:33:55.720 | day and I thought she was silly for saying that.
00:33:58.040 | But I understand more now what she was saying that I didn't understand back then.
00:34:03.840 | And so the consulting work has been so encouraging for me to really tap into that same context.
00:34:16.800 | And on about, I would say, 98%, I've had one or two calls where I went through it and I
00:34:22.860 | wasn't able to give some, necessarily anything that I thought was breakthrough, primarily
00:34:26.720 | because those clients are just doing really, really well.
00:34:30.120 | But on the vast majority of the calls, maybe 90%, too much, maybe 95%, I don't know.
00:34:35.480 | The vast majority of the calls, we've been able to work together and come up with some
00:34:38.280 | really good ideas to substantially improve the speed of goal achievement.
00:34:45.800 | And so I love that.
00:34:46.880 | I feel good.
00:34:47.880 | And it gives me so much better feedback.
00:34:48.960 | One of the great challenges of podcasting, due to the way that you're listening to me
00:34:52.680 | right now, it makes it hard for you to give me feedback.
00:34:55.740 | You're listening to me while you drive the car or while you walk the dog or while you
00:34:59.260 | run in the treadmill or while you wash the dishes.
00:35:02.800 | And due to that, it's hard for you to reach out to me.
00:35:06.680 | Your hands are covered in soapy water.
00:35:08.560 | You have to dry them and go get the phone and tap out on some dumb little keyboard,
00:35:12.800 | an email to me.
00:35:13.800 | And I appreciate it when you do that, but it's hard.
00:35:16.160 | Whereas when I speak live in person, voice to voice in real time, two-way synchronous
00:35:22.640 | communication, it's just so great.
00:35:24.560 | We can have instant feedback and we can adjust the ideas and everything can change quickly.
00:35:28.920 | And so that has been really, really awesome.
00:35:32.360 | So I'm going to do a lot more of it.
00:35:33.960 | I'm going to do 10 hours a week, no more than that, but I'm going to do 10 hours a week
00:35:39.080 | during 2020.
00:35:40.080 | So I would invite you.
00:35:42.220 | If you would like to engage in a personal consulting call with me, reach out to me and
00:35:46.920 | send me an email, joshua@radicalpersonalfinance.com.
00:35:50.560 | And I want to tell you this, here's my biggest disappointment of the consulting calls that
00:35:56.280 | I have done over the last couple of weeks.
00:36:00.200 | The vast majority of my consulting clients, I didn't sit down and calculate the numbers,
00:36:09.360 | so I'm just going with the gut here, 70 or 80%.
00:36:12.200 | The vast majority of my consulting clients are already rich.
00:36:17.920 | I've only had a handful of people who were either in tough situations or who were just
00:36:23.280 | getting started, et cetera.
00:36:26.040 | And friends, it ought not to be that way.
00:36:30.140 | And yet it is.
00:36:32.120 | It ought not to be that way.
00:36:33.880 | And yet it is.
00:36:36.880 | Even some of the consulting clients who were in that just getting started in a difficult
00:36:40.560 | situation or in debt and how do we adjust this, we were able to come up with some really
00:36:44.680 | good solutions.
00:36:46.360 | In one case, I think, I don't need to go through, some really good solutions.
00:36:52.320 | But the vast majority of my consulting clients are already rich.
00:36:55.440 | I would guess, I don't keep client records, so I'm not going to go through and do that.
00:36:59.120 | I guard my client's privacy very zealously.
00:37:02.880 | I shred my notes as soon as I'm done.
00:37:05.600 | But I would guess that the median net worth of the consulting clients of that top 80%
00:37:12.000 | is probably about $3 million.
00:37:15.500 | Don't need my help, but still just looking for, is there a way to optimize?
00:37:18.980 | Is there a way to improve?
00:37:21.240 | Et cetera.
00:37:23.180 | If you're just getting started, if you are, if you're just getting started, you should
00:37:32.000 | start with the information that is the cheapest.
00:37:34.640 | You should get books and read books.
00:37:36.640 | You should listen to podcasts that are free.
00:37:39.760 | But you can dramatically speed up your time if you consult an expert.
00:37:46.280 | You've listened to me for hundreds of hours.
00:37:50.440 | And in that time, you can assess whether you think I can help you or not.
00:37:54.920 | If you don't think I can help you, go and find somebody who can and get some help to
00:38:01.960 | speed up your results.
00:38:04.240 | If you think I can help you, email me, joshua@radicalpersonalfinance.com, and I'll help you.
00:38:10.360 | One of the things, by the way, I'm a big proponent of voluntary exchange.
00:38:16.440 | I have this thing that I tell consulting clients.
00:38:18.400 | If you don't think I was worth it, don't pay me.
00:38:22.800 | I don't ever want somebody to not feel like they were worth it.
00:38:26.440 | Thus far, every consulting client I've ever had has paid me.
00:38:31.920 | I'm a big believer in stand up and lead with value first.
00:38:36.920 | But I plead with you.
00:38:40.320 | My email box should have been filled.
00:38:42.040 | The deal that I offered for Black Friday was insanely cheap.
00:38:45.840 | I've raised my prices for next year.
00:38:47.880 | And I knew, just I was like, "Okay, I'll get back in the rhythm of I'll offer big sale."
00:38:51.240 | And I'm so grateful that so many of you responded.
00:38:54.560 | But my deal that I offered on Black Friday was insanely cheap.
00:38:57.800 | And it should have been 80% filled with people who are just getting started.
00:39:01.920 | Because often, you can make, as a consultant and as a coach, you can make the biggest difference
00:39:05.680 | with somebody who's just getting started to clarify something, etc.
00:39:10.300 | And I loved doing the work that I've done over the last couple of weeks, helping very
00:39:15.160 | wealthy people.
00:39:16.160 | But I want to help unwealthy people too.
00:39:19.960 | I want to speed up your results.
00:39:22.040 | So remember this.
00:39:23.840 | Over the years, one of the things that has served me the best, and this is entirely self-serving
00:39:28.640 | because I'm talking to you in the context of an ad, it's still true.
00:39:33.120 | One of the things that has been most helpful for me is to get and pay for the very best
00:39:39.320 | advice I can get and pay for.
00:39:43.160 | And that speeds up your results because it saves you time.
00:39:48.960 | Money is the ultimate renewable resource.
00:39:52.240 | Time is the ultimate non-renewable resource.
00:39:55.800 | And we go through phases in life.
00:39:58.160 | When you're just getting started, you have no money and tons of time.
00:40:00.640 | And so you value the money more than the time.
00:40:02.320 | As you get older, you start to value the time far more than the money.
00:40:05.520 | Only you know where you are in that process.
00:40:08.440 | But one of the best things you can do to improve your performance is seek out the best advice
00:40:14.000 | that you can get.
00:40:17.800 | I think I'll do a...
00:40:18.800 | I'm adding this to my list to do before the end of the year, but I'm going to give in
00:40:22.960 | the next week after I finish this goal-setting series, I'm going to give you a series on
00:40:26.640 | financial goals that I think you should set.
00:40:29.040 | One of those goals is to choose an amount of your income to invest back into yourself.
00:40:34.200 | It is dumb for you to save 10% of your income into your 401(k) if you're not also investing
00:40:42.000 | 10% of your income back into yourself.
00:40:46.680 | Or 5%.
00:40:47.680 | You just don't know the right number.
00:40:49.640 | But you've got to invest back into yourself.
00:40:52.480 | And so when you're earning in the early years, those numbers are small.
00:40:55.400 | You invest in yourself by buying books.
00:40:57.960 | You invest in yourself by buying courses.
00:41:00.440 | You invest in yourself by getting just a little bit of help here and there from somebody.
00:41:04.400 | And then as it grows, you hire better and better coaches, better and better consultants,
00:41:07.400 | and you move up and up and up.
00:41:09.880 | And that's what speeds up your results.
00:41:12.680 | So I just want to tell you, I'm booked for the rest of December, but I'm committing 10
00:41:20.160 | hours a week, starting in January, all through 2020, 10 hours a week to doing consulting
00:41:25.280 | work.
00:41:26.280 | If you're interested in that, email me, joshua@radicalpersonalfinance.com.
00:41:29.120 | I'll give you the details.
00:41:30.800 | But you will find it to be one of the most valuable things that you can possibly do if
00:41:40.480 | you care about getting results quickly.
00:41:45.040 | It's important.
00:41:46.960 | It's important that you invest in yourself.
00:41:49.960 | Because if you invest in yourself and you get somebody who can see your situation dispassionately,
00:41:56.920 | non-emotionally, and help you think creatively, you can dramatically increase the speed of
00:42:04.200 | your results.
00:42:05.360 | And that matters.
00:42:07.120 | Add over.
00:42:08.520 | Email me, joshua@radicalpersonalfinance.com.
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00:42:41.840 | [MUSIC PLAYING]